Proposed reforms to the joint IMF - World Bank Debt Sustainability Framework for Low-Income Countries approved

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The Debt Sustainability Framework (DSF) is the main tool for multilateral institutions and other creditors to assess risks to debt sustainability in Lower-Income Countries (LICs). 

The LIC DSF applies to low-income countries that have substantially long-maturity debt with terms that are below market terms (concessional debt), or to countries that are eligible for the World Bank Group’s International Development Association (IDA) grants. 

It was introduced in 2005. It was subjected to periodic reviews. Latest review is expected to be operational by mid - 2027.

The proposed reforms introduce significant upgrades in four key areas: 

1. The reforms strengthen the analysis of domestic debt, which has become an increasingly critical source of vulnerability in many low-income countries. 

2. The reforms broaden the analysis of long-term development challenges, including those stemming from climate adaptation and other development needs. 

3. The reforms will bring greater rigor to the analysis of risks to debt sustainability by better distinguishing debt stress risk from debt unsustainability. 

4. The reforms enhance the realism tools and stress tests that support the consistency and accuracy of forecasts. 

  1. " IMF Executive Board Reviews the Joint IMF-World Bank Debt Sustainability Framework for Low Income Countries " - IMF
  2. " World Bank Board Endorses Reforms to the Bank-Fund Debt Sustainability Framework for Low-Income Countries " - The World Bank Group
  3. " Debt Sustainability Framework (DSF) " - The World Bank Group

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