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The Executive Boards of the IMF and World Bank have approved reforms to the Debt Sustainability Framework for Low-Income Countries (LIC-DSF). The reforms follow the first joint review since 2017 and aim to improve the assessment of debt risks in low-income countries amid rising debt levels, changing sources of financing and growing long-term challenges such as climate change.
About LIC-DSF
The LIC-DSF is a framework used jointly by the IMF and World Bank to assess whether a low-income country can take on additional debt without jeopardising its ability to service existing debt. It has been a key tool for the international community in evaluating debt sustainability risks since its introduction in 2005.
The reforms seek to improve the framework by strengthening the analysis of domestic debt, broadening the assessment of long-term development challenges such as climate change, and refining the measurement of countries’ debt-carrying capacity.
The revised framework will also introduce new tools for assessing debt sustainability, strengthen realism tools and stress tests to improve the accuracy and consistency of forecasts, and encourage greater debt-data transparency.
The LIC-DSF has previously been reviewed in 2006, 2009, 2012 and 2017 to respond to changes in the global debt environment and advances in analytical methods.
Source: IMF
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