## ppea2025022 ## Source details **Canonical URL:** [ppea2025022](https://www.imf.org/-/media/files/publications/pp/2025/english/ppea2025022.pdf) ## Other formats - [Markdown version](/-/media/files/publications/pp/2025/english/ppea2025022.pdf.md) - [Structured JSON version](/-/media/files/publications/pp/2025/english/ppea2025022.pdf.json) --- ### Executive summary and context - A challenging context for development: - Major shocks since 2020: negative economic impact of the COVID-19 pandemic; spillovers from the war in Ukraine; tightening of international financial conditions after 2022. - New developments: some factors have subsided since 2023; escalation of trade tensions at the beginning of 2025 raises uncertainty and downside risks for most developing countries. - Continuing challenges: natural disasters, climate and demographic challenges, geopolitical tensions, political instability, and conflicts. - Possible beneficial developments: artificial intelligence and digitalization. - Emphasis on heterogeneity across developing countries and special attention to the poorest and fragile countries. - Administrative/authorship note: - Prepared by the Strategy, Policy, and Review Department under the overall guidance of Guillaume Chabert (SPR); team supervised by Emilia Jurzyk and led by Annapurna Mitra (team lead); document date: May 9, 2025. ### Major shocks, near-term outlook, and cross-country heterogeneity - Near-term growth projections: - 2.8 percent in 2025 - 3 percent in 2026 - These projections are below the 2000-19 average of 3.7 percent and represent a cumulative downgrade of about 0.8 percentage point compared to the Fund’s projections in January 2025. - Transmission channels from shocks: - New tariffs on trade, cuts in official development assistance, pressure on commodity prices (with some prices rising), tightening of international financial conditions, and exchange rate movements. - Cross-country performance (2022-24 and 2024 highlights): - 38 more advanced LICs grew at 5.3 percent on average between 2022-24. - 32 poorest LICs grew by 3.3 percent on average between 2022-24. - Fragile and conflict-affected states (FCS) grew at 2.6 percent. - In 2024, 11 of the world’s 20 fastest growing economies were LICs. - GDP fell by 23.4 percent in Sudan and by 27.6 percent in South Sudan in 2024. - Nine LICs experienced deterioration in GDP per capita over the past 15 years; examples of gains: GDP per capita in Bangladesh and Tajikistan is around twice its level in 2010. - Key evolving trends and implications: - Climate and natural disasters: LICs, FCS, and SDS face pronounced adaptation challenges and greater economic damages from disasters. - Demographics: By 2030, half of all new entrants into the global labor force will come from Sub-Saharan Africa, requiring up to 15 million new jobs annually. - Geopolitical/trade fragmentation risks affecting FDI, trade, and technology transfer. - Artificial intelligence and digitalization: offer efficiency and transparency gains but require investment in digital skills and infrastructure. ### Debt vulnerabilities and fiscal constraints - Overall assessment: - Under staff’s baseline assumptions the risk of a systemic debt crisis continues to appear broadly contained, but uncertainties and risks to the baseline have increased significantly. - LIC exposure and debt-service metrics: - Half of LICs continue to be assessed at high risk of or already in debt distress under the LIC-DSF. - Around 25 percent of current high-risk LIC ratings are driven predominantly by long-term breaches in solvency indicators or judgment reflecting longer-term considerations rather than near-term liquidity breaches. - LICs’ external principal payments exceeded US$20 billion in 2023 and were estimated to have reached US$34 billion in 2024. - External refinancing needs for LICs are close to US$40 billion per year in the near term, about four times the average from the previous decade. - Redemptions to private creditors will average over US$7 billion a year, accounting for 20 percent of upcoming amortizations over the next three years. - For the median LIC, interest payments on total debt doubled over the past ten years, from 4 percent of revenue to 8 percent of revenue. - For the median EM, the interest payment ratio increased from about 7 percent to over 10 percent of revenue. - Market conditions: - Until early 2025, median spreads for EMs and frontier economies had generally declined to pre-pandemic levels following easing of advanced-economy interest rates; since early 2025 volatility has driven up spreads and underlying yields. ### Financing needs to advance development and SDG progress - Feasibility and scale: - Achieving the SDGs by 2030 appears increasingly unlikely. - Unconstrained cumulative financing needs to meet SDGs by 2030 for 2025-29 would range from US$9 trillion to US$12 trillion (without accounting for absorption constraints). - In a constrained illustrative scenario (target extended, capacity constraints applied) staff estimate US$3.5 trillion would be needed over 2025–29 to progress significantly in five key areas—education (SDG 4), health (SDG 3), road infrastructure (SDG 9), electricity access (SDG 7), and water and sanitation (SDG 6), including climate needs in these sectors. - Under the illustrative scenario: - Cumulative additional public spending of US$2.7 trillion would be implemented over 2025-29 (provided sufficient financing sources). - The private sector would cover US$0.8 trillion over 2025-29. - Distribution and relative needs: - Aggregate amounts (2025-29): - Total Financing Needs: EMDEs 3.5; LICs 0.9; EMs 2.6 (trillions of U.S. dollars). - Public sector: EMDEs 2.7; LICs 0.5; EMs 2.2. - Domestic Revenue mobilization: EMDEs 1.3; LICs 0.2; EMs 1.0. - Private sector: EMDEs 0.8; LICs 0.4; EMs 0.4. - Median annual needs (% GDP) for 2025-29: - EMDEs 3.3 percent of GDP - LICs 4.0 percent of GDP - EMs 2.6 percent of GDP - Within LICs: poorest LICs median needs 4.5 percent of GDP; remaining LICs 3.0 percent of GDP. - Fiscal mobilization assumptions: - Scenario assumes a 3-percentage point increase in the tax-to-GDP ratio for the median developing country over the next 5 years. - Modeled tax effort could cover up to US$1.3 trillion of the US$2.7 trillion public sector additional financing (around 50 percent of public sector needs). - Methodology constraints: - Absorption and capacity constraints imposed via one-year and five-year public expenditure caps derived from historical 80th percentile observations (1999-2019). ### Strategic collective action agenda: three pillars - Overview: - Advancing development requires three elements together: strong domestic efforts, significant international support, and proactively addressing debt vulnerabilities. - Pillar I — Strong domestic efforts: - Promote/maintain stable and sound macroeconomic and financial environment. - Implement reforms to boost private-sector-led growth and job creation. - Increase efficiency of public spending and optimize available resources. - Mobilize domestic resources adequately (including a modeled 3-percentage point tax effort). - Strengthen debt management and improve governance; design and sequence reforms carefully to secure social support. - Pillar II — International support: - Enhance capacity development (CD) and provide additional financing from public and private sources. - Include sufficient flows of grants and concessional loans from donors, particularly for the poorest and fragile countries. - Mobilize private finance for EMs and more developed LICs while developing risk-sharing instruments to crowd-in private financing. - Pillar III — Proactive debt management: - Improve debt restructuring processes for countries with unsustainable debt. - Provide pro-active measures (risk-sharing instruments, liability management operations, debt-for-development swaps, debt buy-backs, World Bank guarantee platform support) for countries with sustainable debt but where development spending is crowded out by elevated debt service, conditional on a strong and credible reform agenda. - The IMF–World Bank “3-Pillar Approach” provides the conceptual framework and is being operationalized flexibly. ### IMF role, instruments, and operational priorities - Core IMF contributions: - Tailored policy advice, capacity development, and financial support for balance of payments needs. - Leading role on debt issues and enhancing work on debt restructuring processes. - Lending and catalytic effects: - Reforms completed/advanced: PRGT reform; review of charges and surcharge policy; review of access limits under the GRA. - An additional Fund disbursement of one percentage point (pp) of GDP for LICs is associated with an increase in official development assistance of 2¾pp of GDP (He and others, 2024). - When program size increases by 1pp of GDP, borrowing costs decrease by 23 basis points (Chahine and others, 2024). - Specific relief: 31 countries with debt service to the IMF received SDR 690 million (US$927 million) in debt service relief from April 14, 2020, to April 13, 2022. - Resilience and Sustainability Facility (RSF): - Purpose: assist low- and middle-income countries in building resilience, including climate change and pandemic preparedness. - As of April 1, 2025: 23 countries have benefited; total commitment of SDR 9.1 billion. - Debt restructuring engagement and policy: - IMF could increase support at different stages of restructuring while preserving neutrality; provide scenario analyses and operational information at debtors’ requests; strengthen engagement once a restructuring is launched. - Encourage creditors to deliver on G20 Operational Guidelines and IIF Voluntary Principles for Debt Transparency. - Recent outputs: GSDR “Restructuring Playbook” (April 2025); ongoing LIC-DSF review; supplementary guidance on LIC-DSF (August 2024); reforms to Lending into Official Arrears Policy and Financing Assurances (April 2024). ### Capacity development (CD), surveillance, and collaboration - CD as core instrument: - By 2023, IMF CD accounted for 30 percent of country operations. - LICs received over 40 percent of activities between 2022 and 2024; FCS experienced the fastest growth in CD delivery. - Public finances account for more than half of Fund CD activities; monetary and financial systems nearly 20 percent. - Regional Capacity Development Centers increased from 3 to 17 since 2000 and hosted over 95 percent of training participants in 2023. - CD effectiveness and modalities: - AidData survey perceived helpfulness: Very helpful 0.38; Quite helpful 0.34; Somewhat helpful 0.22; Not at all helpful 0.03; Don't Know / Not Sure 0.03. - Delivery evolved to hybrid virtual/in-person programmatic approaches. - CD Strategy Review emphasized flexibility, integration with surveillance and lending, and customization to country needs. - Multilateral surveillance and financial sector support: - FSAPs and FSSRs provide in-depth financial sector assessments; FSAPs are typically joint with the World Bank in developing countries. - Forthcoming FSAP Review and FSSR work to deepen macro-financial analysis and tailor support, including emergent risks (non-bank finance, crypto, AI). ### Bank‑Fund collaboration and operational coordination - Longstanding cooperation and recent deepening: - Formal agreements: 1989 Concordat, 2007 Joint Management Action Plan, September 2023 Joint Statement, May 2024 Joint Statement on enhanced cooperation on climate action. - Joint initiatives: LIC DSAs, FSAPs, Debt Management Facility, Joint Domestic Resource Mobilization Initiative (JDRMI). - Joint Domestic Resource Mobilization Initiative (JDRMI): - Launched June 2024; as of May 1st, 2025, five “first wave” countries advanced, with joint matrices agreed in four countries including Pakistan and Paraguay. - Climate and pandemic cooperation: - RSF operationalized with World Bank inputs; three RSF arrangements piloted: Madagascar (June 2024), Tanzania (December 2024), Egypt (March 2025). - October 2024 IMF–World Bank–WHO principles for pandemic preparedness cooperation. - Debt collaboration: - DMF advisory services to more than 80 developing countries; DMF Phase IV being designed. - DSSI (2020-21) participation: 48 out of 73 eligible countries; estimated US$12.9 billion in debt service relief over 2020-21. - Common Framework cases: Chad (completed), Ghana and Zambia (almost completed), Ethiopia (ongoing). - GSDR launched February 2023; Cochairs published the “Restructuring Playbook” in April 2025. - Operational coordination tools: - Joint mission modalities, information-sharing guidance (2022), joint CD delivery mechanisms, and country-level steering arrangements. ### Fragile and Conflict‑Affected States (FCS) and Small Developing States (SDS) - FCS scale and vulnerabilities: - FCS group: 39 economies home to one billion people. - Recent human costs: 2021–2023 among most violent years post–Cold War; estimated 600,000 battle deaths (Rustad, 2024); 200,000 battle-related deaths estimated between July 2023 and June 2024 (Mia, 2024). - 122.6 million people forcibly displaced (UNHCR, 2024). - IMF research: three years after an extreme weather event, FCS experience cumulative losses of about 4 percent of GDP compared to 1 percent in other economies (Jaramillo and others, 2023). - Debt distress risk: almost ¾ of FCS using LIC DSF are in, or at high risk of, debt distress, compared with 41 percent of non-FCS LIC DSF countries (IMF, 2024e). - IMF support to FCS: - Since August 2020, over US$44.3 billion in combined emergency financing and UCT commitments to FCS. - Fifteen IMF-supported programs worth US$24.4 billion currently operational. - US$10.4 billion in emergency financing committed to 22 FCS since the pandemic start. - RSF support to Cameroon, DRC, Kosovo, and Niger noted. - Program design tailored with parsimonious conditionality aligned to capacity and CES-informed engagement. - SDS membership and tailored engagement: - 43 small state members with population under 1.5 million; 34 considered SDS after exclusions. - SDS account for 0.2 percent of global population, 0.13 percent of global GDP, and 0.39 percent of IMF quota. - Almost 9 percent of Fund resources dedicated to SDS work: 40 percent surveillance, 40 percent CD, 20 percent lending. - In 2023, the Fund devoted US$25.2m to CD in SDS. - Eligibility adjustments for small states in PRGT and RST noted; enhanced in‑country presence and tailored staff guidance implemented. ### Annex and methodological highlights - SDG costing approach: - Focus sectors: education (SDG4), health (SDG3), road infrastructure (SDG9), electricity access (SDG7), water and sanitation (SDG6). - Uses nominal sectoral costs in a financial programming macroeconomic framework; applies fiscal multipliers and public expenditure caps based on historical 80th percentiles. - Key constrained and unconstrained figures (2025–29): - Unconstrained cumulative 2025-29: 11.7 (total, Annex I Table 1) in an unconstrained scenario; linear unconstrained cumulative 2025-29: 9.2. - Constrained 2040 illustrative scenario: total US$3.5 trillion needed over 2025-29; public US$2.7 trillion; private US$0.8 trillion. - Expenditure caps (80th percentile within subsample, change in total public expenditure in percent of GDP): - LICs quartile examples: - Quartile 1: One Year 11.6; Five Years 3.4 - Quartile 4: One Year 49.8; Five Years 11.9 - EMs quartile examples: - Quartile 1: One Year 11.5; Five Years 2.6 - Quartile 4: One Year 45.9; Five Years 5.9 *Source: EXECUTIVE SUMMARY and chapters/annexes — ppea2025022 (Contribution of the IMF to the International Financing for Development Agenda).* ### EXECUTIVE SUMMARY ### EXECUTIVE SUMMARY ### A challenging context for development - The series of major economic shocks since 2020 has added to longstanding development challenges, with low-income and fragile countries affected the most. - Shocks cited: the negative economic impact of the COVID-19 pandemic, the spillovers from the war in Ukraine, and the tightening of international financial conditions after 2022. - New developments noted: some factors have subsided since 2023; escalation of trade tensions at the beginning of 2025 has negative implications for most developing countries through impacts on global growth and international financial conditions, including elevated uncertainty and significant downside risks. - Other continuing and expected challenges: natural disasters, climate and demographic challenges, geopolitical tensions, political instability, and conflicts. - Possible beneficial developments: artificial intelligence and digitalization. - Emphasis on heterogeneity: increasing heterogeneity in developing countries’ economic conditions and exposures calls for appropriate differentiation in countries’ policy and reform agendas and in international support. - Special attention required: the situation of the poorest and fragile countries. ### Debt vulnerabilities and fiscal constraints - Debt vulnerabilities deserve specific attention, in particular for low-income countries (LICs). - Under staff’s baseline assumptions the risk of a systemic debt crisis continues to appear broadly contained, but uncertainties and risks to the baseline have increased significantly, including on global growth, commodity prices, international financial conditions, exchange rate movements, weaker than anticipated macro-structural policies, or renewed major shocks. - LICs’ exposure: half of LICs continue to be assessed at high risk of or already in debt distress under the IMF/World Bank joint Debt Sustainability Framework for Low-Income Countries (LIC-DSF). - Even when debt appears sustainable under the baseline, many countries face high interest costs and elevated refinancing needs that constrain their ability to finance critical spending necessary to progress on their development path. ### Financing needs to advance development and SDG progress - Achieving the Sustainable Development Goals (SDGs) by 2030 appears increasingly unlikely. - A still ambitious but more plausible path to accelerate development progress requires significant financing. - Staff estimate: US$3.5 trillion would be needed over 2025–29 to progress significantly in five key areas—education (SDG 4), health (SDG 3), road infrastructure (SDG 9), electricity access (SDG 7), and water and sanitation (SDG 6), including climate needs in these sectors—even if the SDG targets in these areas would not be fully achieved by 2030. ### A strategic collective action agenda: three pillars - Advancing development will require the three elements to come together: strong domestic efforts, significant international support, and proactively addressing debt vulnerabilities. - Strong domestic efforts (first pillar): - Promote or maintain a stable and sound macroeconomic and financial environment. - Implement reforms to boost private-sector-led growth and job creation. - Increase the efficiency of public spending and optimize the use of available resources. - Mobilize domestic resources adequately. - Strengthen debt management. - Improve governance. - Design and sequence reforms carefully to secure social support. - These reforms are key to increase resilience against external shocks and require strong national ownership. - International support (second pillar): - Enhance capacity development and provide additional financing from public and private sources. - Include sufficient flows of grants and concessional loans from donors, in particular for the poorest and fragile countries. - Proactive debt management (third pillar): - Improve debt restructuring processes for countries with unsustainable debt. - Provide pro-active measures to help countries with sustainable debt but where development spending is crowded out by elevated debt service, conditional on a strong and credible reform agenda. ### The IMF’s role and instruments - The IMF is a key partner in helping countries maintain or restore macroeconomic stability and implement policies that support sustainable growth and development, while not being a development institution per se. - Core IMF contributions: - Tailored policy advice. - Capacity development. - Financial support to countries faced with balance of payment needs. - Leading role on debt and enhancing work to tackle debt challenges and improve debt restructuring processes. - Collaboration: IMF activities are carried out in close collaboration with partners, particularly the World Bank. - Administrative and authorship details noted: Prepared by the Strategy, Policy, and Review Department under the overall guidance of Guillaume Chabert (SPR); team supervised by Emilia Jurzyk and led by Annapurna Mitra (team lead); document date: May 9, 2025. *Source: EXECUTIVE SUMMARY (ppea2025022) — Contribution of the IMF to the International Financing for Development Agenda* ### 3. Several major shocks have impacted the world economy since 2020. The COVID-19 ### 3. Several major shocks have impacted the world economy since 2020. The COVID-19 ### Major global shocks and near-term outlook - The COVID-19 pandemic hit all economies in 2020 and recovery was followed by an inflation surge in 2022, exacerbated by the war in Ukraine on fuel and food markets, contributing to the cost-of-living crisis. - The ensuing tightening of monetary policy and global financial conditions, and increased risk aversion amid rising geopolitical tensions, weighed on growth and worsened the global economic environment. - Some factors have subsided since 2023, but the escalation of trade tensions at the beginning of 2025 and resulting impacts on global growth and international financial conditions have raised uncertainty and downside risks for most developing countries. - Near-term growth projections: - 2.8 percent in 2025 - 3 percent in 2026 - These projections are well below the 2000-19 average of 3.7 percent and represent a cumulative downgrade of about 0.8 percentage point compared to the Fund’s projections in January 2025. - Transmission channels to developing economies include: new tariffs on trade, cuts in official development assistance from major donors, pressure on commodity prices due to lower global growth (with some commodity prices actually rising), tightening of international financial conditions, and exchange rate movements. ### Cross-country heterogeneity and impacts on LICs, EMs, and FCS - The general trend masks significant differences between countries, with the poorest and fragile countries falling behind. - Emerging Markets (EMs) faced the steepest initial pandemic-related GDP losses but began to recover from 2021. - Low-income countries (LICs) experienced a more difficult path with divergence by structural and institutional characteristics: - The 38 more advanced LICs grew at 5.3 percent on average between 2022-24. - The 32 poorest LICs grew by only 3.3 percent on average between 2022-24. - Fragile and conflict-affected states (FCS) had a growth rate of only 2.6 percent. - In 2024: - 11 of the world’s 20 fastest growing economies were LICs. - GDP fell by 23.4 percent in Sudan and by 27.6 percent in South Sudan. - Nine LICs experienced a deterioration in GDP per capita over the past 15 years, while more advanced LICs realized significant gains (example: GDP per capita in Bangladesh and Tajikistan is around twice its level in 2010). - Poverty levels and incidence of food insecurity have disproportionately affected the poorest LICs and FCS. ### Development setbacks and medium-term structural trends - By early 2024, according to the UN, only 17 percent of the 135 SDGs targets were on track to be achieved, with the remainder showing marginal/moderate progress or a regression. - Many countries still struggle to cover basic needs: food, access to electricity, health, education, and investment in infrastructure and climate resilience. - Institutional capacity, governance, and corruption weaknesses, as well as social fragilities, remain mixed and are essential to address for sustainable development. Key evolving trends and implications - Climate and natural disasters: - Frequency, severity, and damaging impact of natural disasters, particularly climate-related, are increasing and affecting more people. - Developing countries on average experience more severe economic damage compared to other economies. - LICs and FCS are particularly vulnerable and lack adequate preparedness and resilient infrastructure. - Small Developing States (SDS) face pronounced adaptation challenges due to limited economic resources. - Demographics: - Aging populations in many EMs put pressure on pension systems and safety nets. - Rapidly growing and young population in Sub-Saharan Africa presents both opportunities and challenges: - By 2030, half of all new entrants into the global labor force will come from the region, requiring up to 15 million new jobs annually. - Growth in the region generates fewer jobs than elsewhere due to fragility, conflicts, and prevalence of informal labor markets. - Geopolitical, trade tensions, and conflict: - International wars and conflicts are accompanied by in-country political instability (e.g., irregular changes of government, civil wars), which can create refugee and migration spillovers. - Geopolitical tensions risk impacting FDI flows, trade, and technology transfer. - Trade fragmentation and rising trade restrictions have affected imports and exports of developing countries, with total costs of trade fragmentation estimated in related analysis to be sizable for some countries. - Artificial intelligence and digitalization: - Offer opportunities: efficiency gains, productivity growth, improved access to financial services, economic empowerment of women, enhanced efficiency of public spending and tax administrations, increased transparency and tools to address corruption. - Present challenges: need for investment in education and training for digital skills, limited access to electricity and Internet in many LICs, and uncertain impacts on employment. - Policy priority: harness opportunities of AI and digitalization while addressing related challenges, especially digital skills development in LICs. ### Policy differentiation and priorities - Increasing heterogeneity across developing countries requires differentiated policy and reform priorities and tailored international support, with particular attention to poorest and fragile countries. - Policymakers face trade-offs between macroeconomic stability, development needs, and high social expectations. - Investments in development may need to be balanced against rising debt vulnerabilities and limited fiscal space. - Wealthier developing countries can more easily crowd in international private finance with bilateral and multilateral support; the poorest and fragile countries need strong support in institution building and financial support through grants or highly concessional loans. ### Debt vulnerabilities and financing constraints - Debt vulnerabilities remain elevated; while the risk of a systemic debt crisis appears broadly contained under updated baseline assumptions, uncertainty has significantly increased. - Public debt levels in developing countries increased due to the pandemic and have stabilized since; under the latest updated baseline assumptions they are expected to remain stable or decline slightly over the medium term for both LICs and EMs, but remain elevated and higher than pre-COVID. - LIC vulnerability: - Half of LICs continue to be assessed at high risk or already in debt distress under the IMF/World Bank LIC-DSF, though this share has been declining since 2021 and the share at low and moderate risk has returned to pre-pandemic levels. - A high-risk rating does not necessarily signal near-term debt distress; around 25 percent of current high-risk ratings are driven predominantly by long-term breaches in solvency indicators or the application of judgment to reflect longer-term considerations rather than near-term liquidity breaches. - Elevated debt service burdens constrain development spending: - LICs’ external principal payments exceeded US$20 billion in 2023 and were estimated to have reached US$34 billion in 2024. - External refinancing needs for LICs are close to US$40 billion per year in the near term, about four times the average from the previous decade. - Redemptions to private creditors will average over US$7 billion a year, accounting for 20 percent of upcoming amortizations over the next three years. - For the median LIC, interest payments on total debt doubled over the past ten years, from 4 percent of revenue to 8 percent of revenue. - For the median EM, the interest payment ratio increased from about 7 percent to over 10 percent of revenue. - Market conditions: - Until early 2025, median spreads for EMs and frontier economies had generally declined to pre-pandemic levels following easing of advanced-economy interest rates, though underlying yields remained high. - Since early 2025, market volatility and uncertainty have driven up spreads and underlying yields, with some frontier issuers trading at or near stress levels and struggling to secure financing at an affordable cost. - Financing composition and flows (as presented): - LICs: external debt service and total interest expense shown relative to revenue. - EMDEs: PPG net external debt flows and LICs’ external PPG debt amortization profiles indicate changing composition of multilateral, bilateral, bond holders, and other private flows. *CONTRIBUTION OF THE IMF TO THE INTERNATIONAL FINANCING FOR DEVELOPMENT AGENDA, INTERNATIONAL MONETARY FUND* ### 10. Meanwhile, financing flows to developing countries, and especially to LICs, have ### 10. Meanwhile, financing flows to developing countries, and especially to LICs, have ### Decline in financing flows and composition shifts - New debt financing declined sharply as key creditors reassessed exposures; net public and publicly guaranteed (PPG) debt flows from bondholders turned negative after peaking at close to US$130 billion in 2017. - With countries being priced out of international bond markets amid tight global financial conditions and limited financing from bilateral creditors, many have turned to domestic market financing to fill the gap. - Rapid increase in the share of domestic financing faces limits for countries with shallow domestic markets and large roll-over needs. - Rise of domestic financing presents risks of crowding out private credit and deepening the sovereign-bank nexus. - Official flows to LICs increased in 2020, declined in 2021 and 2022, and only modestly recovered in 2023; flows to EMs increased throughout the period. - Private inflows rebounded strongly in 2021 for both EMs and LICs, but have since declined overall, with notable drops in other investments in LICs and diminishing debt inflows in recent periods for all developing countries. - Remittances have maintained a positive trend, serving as a countercyclical source of support, but primarily support consumption rather than longer-term development spending. ### Official Development Assistance (ODA) trends and implications - Total net ODA flows as a share of donor countries’ GNI have remained around 0.3 percent since 2010, increasing modestly to 0.37 percent in 2022 and 2023—still far below the United Nations target of 0.7 percent. - When calculated as a share of recipient countries’ GNI, ODA flows to LICs significantly declined from 2010 to 2016; after some stabilization between 2016 and 2021, these flows declined further in 2022 and 2023. - Recent policy announcements in major donor countries suggest further declines in ODA in coming years. - Potential consequences of reduced international aid for LICs and FCS: deterioration of living and health standards, social unrest, increased dependence on public financing, and further exacerbation of debt vulnerabilities. - For certain aid-receiving countries, macroeconomic consequences could include worsening of current accounts, decline in foreign reserves, pressure on exchange rates and prices, and lower consumption and investment. ### SDG financing needs and scenarios - Without considering absorption and other capacity constraints, estimated cumulative financing needs to meet the SDGs by 2030 would range from US$9 trillion to US$12 trillion for 2025-29. Financing on that scale would be extremely difficult to mobilize and would entail unrealistic growth of public spending. - In an illustrative scenario that accounts for absorption capacity and other constraints, staff estimates US$3.5 trillion would be needed over 2025-29 to progress significantly toward the SDGs (with the assumption that the key SDGs would be met by 2040 for illustrative purposes). - Under this scenario: - Cumulative additional public spending of US$2.7 trillion would be implemented over 2025-29 (provided there are sufficient financing sources to meet the needs). - The private sector would cover the residual of US$0.8 trillion. - The illustrative scenario is described as the most ambitious realistic path to progress toward the SDGs while accounting for countries’ absorption and capacity constraints. ### Distribution of SDG-related needs across country groups - Median additional annual financing needs for LICs over 2025-29 would stand at 4.0 percent of GDP compared to 2.6 percent for EMs. - In absolute terms, EMs would need four times more financing than LICs, reflecting their higher economic size. - Within the LIC sample, poorest countries’ financing needs are higher in relative terms: 4.5 percent of GDP compared to 3.0 percent for the remaining LICs. ### Key risks identified - Limits to scaling up domestic market financing in countries with shallow markets and large roll-over needs. - Crowding out of private credit and deepening sovereign-bank nexus associated with increased domestic financing. - Declines in ODA could harm living and health standards, trigger social unrest, and exacerbate debt vulnerabilities. - Inefficiencies in public investment and spending reduce returns on infrastructure, health, and education investments and threaten fiscal sustainability. ### Policy recommendations and strategic collective action agenda - Countries should promote or maintain a stable and sound macroeconomic and financial environment and implement a strong domestic reform package to: - Boost private sector-led growth and job creation. - Increase the efficiency and prioritization of public spending. - Mobilize domestic resources adequately. - Strengthen debt management and improve governance. - Increase resilience against external shocks. - International support should complement domestic efforts through well-coordinated and sequenced capacity development, and additional public and private financing. - Proactively address debt challenges: - Improve debt restructuring processes for countries with unsustainable debt. - Apply proactive measures for countries with sustainable debt and a strong and credible reform agenda where development spending is crowded out by elevated debt service. - Specific domestic reforms and policy priorities: - Deliver a stable and sound macroeconomic and financial environment—maintain low and stable inflation, sound fiscal policies, adequate external sector policies, and a stable financial system. - Boost growth and job creation through supply-side improvements, a stronger business environment, easing barriers to entrepreneurship, bundling and sequencing reforms, and raising productivity (particularly in LICs) via governance, capital accumulation, and human capital investments. - Strengthen the efficiency of public spending, especially investment spending; address infrastructure governance weaknesses; and manage fiscal risks to protect fiscal sustainability. - Mobilize domestic revenues adequately—raise tax-to-GDP ratios via better-designed core domestic taxes, broadened bases, and improved tax administration while considering distributional effects and social acceptability. - Deepen domestic financial markets to increase available resources and develop long-term finance, while remaining vigilant about public domestic debt vulnerabilities and the sovereign-bank nexus. - Bolster debt transparency, debt management, and debtor-investor relations; reduce gaps in debt transparency and support initiatives that improve the quality of debt data reported. - Tackle corruption, strengthen governance, and improve transparency and accountability, including the publication of reliable economic data. *Italic: Source — ppea2025022 - 10. Meanwhile, financing flows to developing countries, and especially to LICs, have* ### 15. Advancing the development agenda will require strong and coordinated external ### 15. Advancing the development agenda will require strong and coordinated external support to complement domestic policy and reform efforts ### Overview - External support must complement domestic policy and reform efforts through well-sequenced and coordinated capacity development (CD) and financial support, particularly grants and concessional loans. - Grants and concessional financing are essential to help countries invest in growth-enhancing key sectors while preserving debt sustainability, especially for LICs and FCS. ### Capacity Development and Financial Support - Expand and improve delivery of CD by bilateral and multilateral partners, with stronger prioritization, tailoring, sequencing, and coordination to avoid duplication and overburdening recipient authorities. - Ensure CD is aligned with country ownership, developmental objectives, and absorptive capacity. - Example initiative: Joint Domestic Resource Mobilization Initiative (JDRMI) implemented by the IMF and World Bank to help countries raise public revenues, improve public spending efficiency, and mobilize private savings through coordinated CD (IMF and WB, 2024b). - As of May 1st, 2025, the Fund and the Bank have advanced JDRMI implementation with five “first wave” countries. - For four of these countries, including Pakistan and Paraguay, implementation has included agreement on “joint matrices” for reforms and actions supported by CD from IFIs; a fifth country was included more recently with a slow start due to broader difficulties. - Recent institutional reforms and progress: - IMF reforms: reform of the Poverty Reduction and Growth Trust (PRGT) facilities and financing; review of charges and the surcharge policy; review of access limits under the General Resource Account (GRA). - World Bank: concluded the 21st replenishment of the International Development Association (IDA) and is implementing the “A Future-Ready World Bank Group” strategy. - Other MDBs and bilateral partners encouraged to increase support, including via ODA and sustainable financing practices. - For countries facing debt service challenges, bilateral partners should consider grants and loans with affordable rates, sufficiently long maturities and grace periods, and aim to maintain collective exposure to countries implementing robust domestic reform agendas supported by IMF programs. - Mobilizing private finance is essential for EMs and more developed LICs: - Domestic role: implement sound macroeconomic policies, strengthen transparency and governance, and create enabling conditions for growth and higher FDI. - International role: develop risk-sharing instruments to crowd-in private finance where appropriate. - Caution: ensure private debt is incurred at a pace consistent with debt sustainability. ### Pro-Actively Addressing Debt Challenges - Debt vulnerabilities remain elevated in developing countries; debt stocks are high—particularly in LICs—but for most countries remain manageable and are projected to remain stable or slightly decrease over the medium term. - Key debt statistics and comparisons: - LICs at high risk or already in debt distress have a median total debt-to-GDP ratio around 55 percent. - This compares to a ratio of 90 percent for the 39 HIPC-eligible countries at the start of the HIPC Initiative. - The analysis covers 136 EMDEs in a granular “mapping” exercise. - Debt service challenges are elevated and on a worrying trend compared to historical levels. - Question of a new debt cancellation initiative: - Current assessment: most developing countries need recurrent flows of new and affordable financing rather than a one-off debt stock reduction. - Debt cancellation would consume public resources that could be allocated to concessional MDB financial tools to leverage donor resources. - Risks: moral hazard, protracted negotiations (HIPC took several years), and prolonged uncertainty that could impair new private finance. - Caveat: debt cancellation could become necessary if unsustainable debt burdens become widespread. ### Improving Restructuring Processes and the “Pathway” for High Debt Service - Priority actions: - Improve restructuring processes to ensure countries with unsustainable debt have access to timely and sufficiently deep debt relief. - Continue progress achieved under the Common Framework and through the Global Sovereign Debt Roundtable (GSDR), including the publication in April 2025 of the GSDR “Restructuring Playbook”. - Further progress on creditor coordination is needed to ensure efficient, timely, reliable, and predictable processes. - Accelerate implementation of a robust “pathway” for countries with sustainable debt but high debt service that crowds out productive spending: - This pathway entails a robust domestic reform agenda, strong external support from bilateral and multilateral partners, and efforts to crowd-in private sector financing at affordable costs. - The IMF–World Bank “3-Pillar Approach” provides the conceptual framework for this pathway and is being implemented flexibly based on country specificities, with CD support. ### The Three-Pillar Approach (summary of Box 2) - Pillar I: Structural reforms to boost growth and job creation, increase spending efficiency, and mobilize domestic resources; supported by technical assistance, CD, and policy advice. - Emphasis on fiscal policy enhancement, institutional quality, business environment improvements, domestic financial market development, and strong country ownership. - Joint IMF–World Bank Domestic Resource Mobilization Initiative referenced as launched (IMF and WB, 2024b). - Pillar II: Foster external financial support while structural reforms take effect. - Mobilize concessional loans and grants from IFIs and bilateral partners consistent with reform strength and country needs. - For countries in Fund-supported programs, official bilateral creditors should endeavor to maintain exposures where feasible during the program period. - Pillar III: Reduce debt servicing burdens through risk-sharing instruments, liability management operations (e.g., debt-for-development swaps, debt buy-backs), and World Bank guarantee platform support. - Operationalization efforts since last Fall include: - A granular mapping of debt vulnerabilities in the 136 EMDEs covered by this paper (February 2025 note on “Debt Vulnerabilities and Financing Challenges in EMDEs – an Overview of Key Data”; staff updated using latest WEO data with similar aggregated results but heightened uncertainty in April 2025 WEO). - Deeper reflection on tools for different country situations, lessons from Joint DRM Initiative implementation, and recent debt swap operations including Cote d’Ivoire’s debt swap in December 2024 supported by the World Bank. - Moving to how tools (e.g., DRM, liability management operations) can be combined for certain countries, including the role of official bilateral creditors. - Note: The tools mentioned are used in many countries beyond those facing debt service challenges; using them does not necessarily imply the country has debt service problems. ### IMF Role and Recommendations - Strengthen IMF contribution to debt restructuring and debt service challenges: - On restructuring processes: - The IMF could further increase support at different stages of a restructuring while preserving its role as a neutral advisor. - At debtors’ requests, IMF staff could provide scenario analyses and information on operational aspects of the restructuring process and application of IMF policies. - Once a restructuring is launched, the Fund could strengthen engagement to promote and facilitate debtor-creditor engagement for timely resolution. - The GSDR could publish best or good practices and clarifications on processes, building on the “Restructuring Playbook”. - On addressing debt service challenges: - The Fund could play a stronger role in helping countries mobilize creditors through proactive engagement by country teams, particularly with official bilateral creditors. - For countries with sustainable debt but crowded-out development spending and credible reform agendas, IMF-supported programs could place more emphasis on development spending needs, potentially requiring higher short-term financing volumes from the Fund and partners during the “pathway” while respecting the Fund’s financing framework. - Enhance debt transparency and data accuracy: - Sustain and develop efforts by debtor countries to strengthen legal and operational debt management frameworks, data quality, and debt recording and reporting. - Encourage creditors (official and private) to deliver on past initiatives such as the G20 Operational Guidelines for Sustainable Financing and the Institute of International Finance Voluntary Principles for Debt Transparency. - Reference: June 2023 paper “Making Public Debt Public – Ongoing Initiatives and Reform Options” (IMF, 2023e) assesses options to improve debt transparency and their resource implications. - IMF’s broader supporting role: - Provide policy advice, CD, and financial support to help countries maintain or restore macroeconomic and financial stability and implement sound policies for sustainable growth and development. - The IMF’s bilateral surveillance focuses on fiscal, monetary, external sector, and financial sector policies, as well as structural reforms critical to macroeconomic stability and growth. - Forthcoming comprehensive surveillance review will analyze the evolving landscape and set surveillance priorities and modalities for the next 5 years. - Recent tailored engagement developments include an enhanced strategy for FCS (Annex II) and actions/guidance on engagement with SDS (Annex III). - The IMF draws on nearly 80 years of experience and universal membership in its bilateral surveillance and CD work. *Source: IMF — Contribution of the IMF to the International Financing for Development Agenda (Chapter 15).* ### 22. The IMF also supports global growth and resilience of developing countries by ### 22. The IMF also supports global growth and resilience of developing countries by ### Multilateral surveillance and policy monitoring - Publishes in-depth analyses and policy advice on issues relevant to developing countries, including: - lessons on protecting vulnerable groups amid rising food and energy prices (IMF, 2022a); - the social acceptability of structural reforms (IMF, 2024f, IMF, 2025d); - advice on industrial policy (IMF, 2023c, IMF, 2024g, McDonald and others, 2024); - addressing debt vulnerabilities (IMF, 2024h). - Assesses risks to global and regional financial conditions through bi-annual Early Warning Exercises conducted with the Financial Stability Board. - Produces the annual report on Macroeconomic Developments and Prospects for Low-Income Countries. ### Financial sector resilience: FSAP and FSSR - The Financial Sector Assessment Program (FSAP): - provides in-depth assessments of financial sector resilience, assessing risks and vulnerabilities, financial sector policy and crisis management frameworks, financial safety nets, and emerging risks such as cybersecurity threats; - recommendations build long-term roadmaps for financial sector reforms to promote financial stability, economic growth, financial deepening, and financial inclusion; - for developing countries, FSAPs are conducted jointly with the World Bank; - forthcoming FSAP Review will guide deeper macro-financial analysis in bilateral surveillance and produce cutting-edge analysis of risks from changes in the financial system (non-bank financial institutions, crypto assets, new payment platforms, use of AI). - The Financial Sector Stability Reviews (FSSRs): - deployed in low and lower-middle income countries and FCS; - assess authorities’ capacity to identify, monitor, manage and mitigate risks to financial stability; - lead to a medium-term technical assistance roadmap prepared in partnership with recipient countries and other CD providers, including the World Bank. ### Capacity development (CD): scale, focus, and strategy - CD as a core instrument: - aims to enhance institutional capacity, improve human capital, and strengthen governance structures; - reinforces IMF policy advice to design and implement sound macroeconomic policies, maintain monetary and financial stability, create fiscal space, and build resilience. - CD delivery areas of comparative advantage: central bank operations, financial regulation and supervision, tax and spending policy and institutions, macroeconomic and financial statistics, public debt management, and financial systems. - Trends and allocations: - By 2023, IMF CD accounted for 30 percent of country operations. - LICs received over 40 percent of activities between 2022 and 2024. - FCS experienced the fastest growth in CD delivery during the same period. - Overall, CD related to public finances accounts for more than half of the Fund's total CD activities, and monetary and financial systems represent nearly 20 percent. - Regional Capacity Development Centers increased from 3 to 17 since 2000 and hosted over 95 percent of training participants in 2023. - New CD areas integrated: AML/CFT, governance, digitalization, GovTech and digital money. - CD Strategy Review outcomes (IMF, 2024d and IMF, 2024e): - emphasized flexibility of Fund CD, integration with surveillance and lending, and customization to country needs; - underscored commitment to technical assistance and training in macro-critical areas. - Global Public Finance Partnership (GPFP): - consolidates financing for public finance CD to help members strengthen fiscal institutions, boost revenues, and improve public spending quality; - supported by diverse development partners to bolster CD delivery in public finance and support progress toward the SDGs. ### IMF role in the Global Financial Safety Net and lending framework - Positioning: - IMF is not a development finance institution but is central to the Global Financial Safety Net (GFSN), focusing on balance of payments (BOP) problems and macroeconomic stability. - The IMF’s lending layer remains almost universal and often the only external layer available to developing economies apart from their own foreign exchange reserves. - Crisis response and reforms: - Swift multi-faceted response to COVID-19, including immediate large-scale emergency financing in Spring 2020 and debt service relief under the Catastrophe Containment and Relief Trust. - Fund lending increased significantly following the pandemic and the shock from the war in Ukraine. - Reforms completed or advanced: - Review of PRGT Facilities and Financing (IMF, 2024i) — bolstered capacity to support LICs, including by more than doubling the capacity of the PRGT compared to pre-pandemic levels, while restoring self-sustainability of the Trust. - Review of Charges and the Surcharge Policy completed in October 2024 — significantly lowered borrowing costs for members under the GRA while safeguarding the Fund’s financial capacity. - Comprehensive review of GRA access limits concluded in December 2024. - Catalytic effects of IMF lending: - An additional Fund disbursement of one percentage point (pp) of GDP for LICs is associated with an increase in official development assistance of 2¾pp of GDP, half of which is from multilateral donors (He and others, 2024). - When program size increases by 1pp of GDP, borrowing costs decrease by 23 basis points (Chahine and others, 2024). - Evidence on magnitude of private financing crowd-in varies considerably across studies. - Specific relief statistic: - 31 countries with debt service to the IMF received SDR 690 million (US$927 million) in debt service relief over the two-year period from April 14, 2020, to April 13, 2022. ### Resilience and Sustainability Facility (RSF) - Purpose: assists low- and middle-income countries in building resilience against external shocks and addressing longer-term challenges, including climate change and pandemic preparedness. - As of April 1, 2025: - 23 countries have benefited from the RSF; - total commitment of SDR 9.1 billion. ### Ongoing and planned improvements to lending and program design - Forthcoming reviews and expected improvements: - Review of Program Design and Conditionality; - Review of Exceptional Access Policies. - These reviews will provide opportunities to improve effectiveness of IMF financial support in light of recent program experiences and evolving vulnerabilities and needs. ### Debt policy, sustainability work, and sovereign debt architecture - IMF roles and tools: - Leads on debt issues through debt sustainability analyses and support for international debt initiatives; LIC efforts typically implemented jointly with the World Bank (LIC DSAs, past HIPC, DSSI, Common Framework). - Co-launched the GSDR in 2023 and proposed in 2024 the “3-pillar approach” to address debt service challenges. - Promotes enhanced collective action clauses in international sovereign bonds and identifies gaps in resolution architecture. - Enhances debt transparency requirements across surveillance, lending, and CD. - Notable historical and recent initiatives: - G20 DSSI (April 2020): 48 out of 73 eligible countries participated, benefiting from an estimated US$12.9 billion in debt service relief over 2020-21. - GSDR launched in February 2023; issued the “Restructuring Playbook” in April 2025. - IMF policy updates to reflect evolving debt landscape: - MAC-SRDSF introduced in 2023. - Ongoing comprehensive review of the IMF-World Bank LIC-DSF; supplementary guidance on the LIC-DSF issued in August 2024 to address climate change impacts, domestic debt vulnerabilities, and use in sovereign debt restructuring context (IMF, 2024l). - 2022 review of the Fund's Sovereign Arrears Policies and Perimeter (IMF, 2022e). - April 2024 reforms to the Lending into Official Arrears Policy and Financing Assurances (IMF, 2024m) — strengthened capacity to support countries engaged in debt restructuring and provided stronger incentives for faster creditor processes. - Publication of Guidance Note on The Financing Assurances and Sovereign Arrears Policies and the Fund’s Role in Debt Restructurings (IMF, 2024n) — comprehensive overview of interrelated policies. - Ongoing stocktaking of private creditor participation in recent sovereign debt restructurings to assess efficacy of current debt architecture. - IMF response to UN invitation (Action 50 (b) of the “Pact for the Future”, September 2024): advancing comprehensive workstreams on debt to enhance the Fund’s role in tackling debt challenges and supporting improved debt restructuring mechanisms. ### Collaboration with development partners (Box 3) - Bank-Fund collaboration: - Longstanding cooperation frameworks (1989 Concordat, 2007 Joint Management Action Plan) and joint products (LIC DSAs, FSAPs); - September 2023 Joint Statement on Enhancing IMF-World Bank Collaboration; May 2024 Joint Statement on enhanced cooperation on climate action — operational in June 2024. - Broader partner engagement: - With MDBs: joint actions on revenue and customs administration, social support programs, financial sector and payment systems, AML/CFT and governance, debt sustainability, climate resilience, and gender. - May 2024: IMF Executive Board authorized use of SDRs for hybrid capital instruments issued by MDBs (IMF, 2024o). - Dialogue and policy/operational work with UN entities (ILO, UNCTAD, UN DESA, UNDP, UNFPA, UNHCR, UNODC, UN Women, WFP, WHO), WTO, OECD, FATF, and FATF-Style Regional Bodies. - Joint CD delivery mechanisms: joint missions, country-level coordination with HQ and field participation, steering committees of RCDCs and Global Thematic Funds (including the Debt Management Facility), and global initiatives such as the Platform for Collaboration on Tax and GPFP. - Pandemic preparedness cooperation: - October 2024: IMF, World Bank and WHO agreed on broad principles for cooperation on pandemic preparedness, providing the framework for IMF’s RSF support on pandemic-related issues. *Source: Contribution of the IMF to the International Financing for Development Agenda (chapter content provided).* ### References ### References ### IMF working papers, staff discussion notes, and policy papers - Aggarwal, R., P. 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Schneider, 2019, “How to Design Tax Policy in Fragile States,” ,” IMF How to Note 19/04, (Washington: International Monetary Fund). - Schwartz, G., M. Fouad, T. Hansen, and Geneviève Verdier, eds. 2020, “Well Spent: How Strong Infrastructure Governance Can End Waste in Public Investment,” (Washington: International Monetary Fund). - Tanzi, V. and Mario Blejer 1984, Fiscal Deficits and Balance of Payments Disequilibrium in IMF Adjustment Programs. Adjustment, Conditionality, and International Financing. Papers Presented at the Seminar on "The Role of the International Monetary Fund in the Adjustment Process" held in Vina del Mar, Chile, April 5-8, 1983 ### Multilateral, UN, World Bank, and NGO sources - Global Sovereign Debt Roundtable (GSDR) Co-Chairs, 2025, “Sovereign Debt Restructuring: A Playbook for Country Authorities,” Washington, DC. April. - Independent Evaluation Office (IEO), 2023 “The International Monetary Fund’s Emergency Response to the COVID-19 pandemic”, Independent Evaluation Office of the International Monetary Fund, (Washington). - Sustainable Development Solutions Network (SDSN), 2020, “The Sustainable Development Report 2020: The Sustainable Development Goals and COVID-19,” New York, NY. - United Nations High Commissioner for Refugees (UNHCR) 2023, “Global Appeal 2023,” United Nations, New York, NY. - United Nations Environment Programme, 2024, “Adaptation Gap Report 2024: Come hell and high water—As fires and floods hit the poor hardest, it is time for the world to step up adaptation actions,” Nairobi. - United Nations 2024a, “Sustainable Development Goals Report 2024,” New York, NY. - United Nations 2024b, “Pact for the Future, Global Digital Compact and Declaration on Future Generations,” New York, NY. - World Bank, 2020a, “Capital Markets Development A Primer for Policymakers” (Washington: World Bank). - World Bank 2020b, “World Bank Group Strategy for Fragility, Conflict, and Violence 2020–2025,” Board Report, (Washington: World Bank). - World Bank 2024a, “An Open Letter on IDA21 to Our Shareholders, Clients, Partners, and the Global Development Community,” Statement. (Washington). - World Bank 2024b, “Global Tax Program Health Taxes Knowledge Note Series,” (Washington: World Bank). - World Bank, 2024c, “A Future-Ready World Bank Group,” Update to Governors. Development Committee, Washington, DC. October. - World Bank, 2025, “World Bank’s Global Economic Prospects”, (Washington: World Bank). - International Monetary Fund, and World Bank, 2024a, “IMF-World Bank Non-Paper on Actions to Support Countries Faced with Liquidity Challenges,” Washington, DC. October. - International Monetary Fund, and World Bank, 2024b, “Stepping Up Domestic Revenue Mobilization: A New Joint Initiative from the IMF and WB,” Washington, DC. June. ### Other technical notes and datasets - Bailey, Michael A., Anton Strezhnev, and Erik Voeten, 2017. "Estimating dynamic state preferences from United Nations voting data." Journal of Conflict Resolution, Vol. 61, No. 2, February 2017. - Kemoe, L., and Z. Zhan, 2018, “Fiscal Transparency, Borrowing Costs, and Foreign Holdings of Sovereign Debt,” IMF Working Paper 18/189. (Washington: International Monetary Fund). - Gu, Jiajia, Lisa Kolovich, Jorge Mondragon, Monique Newiak, and Michael Herrmann. 2024. “Promoting Gender Equality and Tackling Demographic Challenges.” IMF Gender Note 2024/002, International Monetary Fund, Washington, DC. - He, B., P. Johnston, and A. Velasquez. 2024, "The Catalytic Impact of IMF Lending on Official Development Assistance," IMF Working Paper, 24/134, (Washington: International Monetary Fund). ### Appendix I. List of Countries Included in the Sample - Notes: - 1 Country sample analyzed in the paper encompasses all countries which are not high-income countries in the World Bank's classification, excluding India and China due to their economic size and specific situations, plus all countries classified as Small Developing States by the IMF (see 2024 Staff Guidance Note on IMF’s Engagement with Small Developing States). - 2 Countries with an asterisk (*) are Low-income Countries in the IMF's classification. These are countries that are eligible for IMF's concessional financial assistance from the Poverty Reduction and Growth Trust. - 3 Countries with a chapeau (^) are Small Developing States in the IMF's classification. - 4 Countries in bold typeface are Fragile and Conflict-affected States. - Caucasus and Central Asia - Armenia - Azerbaijan - Georgia - Kazakhstan - Kyrgyz Republic* - Tajikistan* - Turkmenistan - Uzbekistan* - Bangladesh* - Emerging and Developing Asia entries interleaved in source: ArmeniaKiribati*^Bhutan*^Philippines AzerbaijanMarshall Islands*^Cambodia*Samoa*^ GeorgiaMicronesia, Fed. Sts.*^Fiji^Sri Lanka KazakhstanMyanmar*IndonesiaThailand Kyrgyz Republic*Papua New Guinea*Lao PDR*Tonga*^ Tajikistan*Solomon Islands*^MalaysiaVanuatu*^ TurkmenistanTimor-Leste*^Maldives*^Vietnam Uzbekistan*Tuvalu*^MongoliaNauru^ Bangladesh*Nepal*Palau^ - Emerging and Developing Europe - Kosovo - Ukraine - Albania - Belarus - Bosnia and Herzegovina - Moldova* - Montenegro^ - North Macedonia - Serbia - Türkiye - KosovoHaiti*EcuadorSt. Lucia*^ UkraineVenezuela, RBEl SalvadorSt. Vincent and the Grenadines*^ AlbaniaArgentinaGrenada*^Suriname^ BelarusBelize^GuatemalaAntigua and Barbuda^ Bosnia and HerzegovinaBoliviaHonduras*Bahamas, The^ Moldova*BrazilJamaicaBarbados^ Montenegro^ColombiaMexicoGuyana^ North MacedoniaCosta RicaNicaragua*St. Kitts and Nevis^ SerbiaDominican RepublicParaguayTrinidad and Tobago^ TürkiyeDominican RepublicPeru - Middle East, North Africa, Afghanistan, and Pakistan - Afghanistan* - Iraq - Lebanon - Libya - Somalia* - Sudan* - Syrian Arab Republic* - Yemen, Rep.* - Algeria - Djibouti*^ - Egypt, Arab Rep. - Iran, Islamic Rep. - Sub-Saharan Africa entries interleaved in source: Afghanistan*Burkina Faso*São Tomé and Príncipe*^Lesotho* IraqBurundi*South Sudan*Liberia* LebanonCameroon*Zimbabwe*Madagascar* LibyaCentral African Republic*AngolaMalawi* Somalia*Chad*Benin*Mauritius^ Sudan*Comoros*^BotswanaNamibia Syrian Arab Republic*Congo, Dem. Rep.*Cabo Verde*^Rwanda* Yemen, Rep.*Congo, Rep.*Côte d’Ivoire*Senegal* AlgeriaEritrea*Equatorial GuineaSierra Leone* Djibouti*^Ethiopia*Eswatini^South Africa Egypt, Arab Rep.Guinea-Bissau*GabonTanzania* Iran, Islamic Rep.Mali*Gambia, The*Togo* - Sub-Saharan Africa (as presented in source) - Angola - Benin - Botswana - Burkina Faso* - Burundi* - Cabo Verde*^ - Cameroon* - Central African Republic* - Chad* - Comoros*^ - Congo, Dem. Rep.* - Congo, Rep.* - Côte d’Ivoire* - Eswatini^ - Equatorial Guinea - Eritrea* - Ethiopia* - Gabon - Gambia, The* - Ghana entries not explicitly listed in provided extract - Guinea-Bissau* - Lesotho* - Liberia* - Madagascar* - Malawi* - Mauritius^ - Namibia - Rwanda* - Senegal* - Sierra Leone* - South Africa - South Sudan* - Tanzania* - Togo* - Zimbabwe* - Emerging and Developing Asia and Latin America and the Caribbean (as presented in source) - Philippines - Cambodia* - Fiji^ - Sri Lanka - Myanmar* - Indonesia - Thailand - Papua New Guinea* - Lao PDR* - Malaysia - Tonga*^ - Solomon Islands*^ - Vanuatu*^ - Timor-Leste*^ - Maldives*^ - Vietnam - Tuvalu*^ - Mongolia - Nauru^ - Kiribati*^ - Bhutan*^ - Marshall Islands*^ - Micronesia, Fed. Sts.*^ - Palau^ - Haiti* - Ecuador - Venezuela, RB - El Salvador - St. Lucia*^ - St. Vincent and the Grenadines*^ - Argentina - Grenada*^ - Suriname^ - Belize^ - Guatemala - Antigua and Barbuda^ - Bolivia - Honduras* - Bahamas, The^ - Brazil - Jamaica - Barbados^ - Colombia - Mexico - Guyana^ - Costa Rica - Nicaragua* - Dominica*^ - Paraguay - Trinidad and Tobago^ - Dominican Republic - Peru - St. Kitts and Nevis^ *Italic line:* *References — ppea2025022 - References (source PDF).* ### Appendix II. Low-income Countries Classifications by Income ### Appendix II. Low-income Countries Classifications by Income ### Classification of Low-income Countries by GNI per capita - Poorest LICs (GNI per capita at or below IDA cutoff of US$ 1,335. US$1,335=100 percent) - Category: <=100 (32) - Countries: Afghanistan; Burkina Faso; Burundi; Central African Republic; Chad; Democratic Republic of Congo; Eritrea; Ethiopia; Gambia, The; Guinea1; Guinea-Bissau; Haiti1; Lao P.D.R.; Lesotho; Liberia; Madagascar; Malawi; Mali; Mozambique; Myanmar; Nepal1; Niger; Rwanda; Sierra Leone; Somalia; South Sudan; Sudan; Syria; Tanzania; Togo; Uganda; Yemen; Zambia. - Note: 1 Guinea, Haiti and Nepal are classified as poorest LICs, even though their GNI per capita is above the IDA cutoff, for consistency with 2024 Review of PRGT Finances and Facilities approved by the Board in October 2024. - More advanced LICs (GNI per capita above IDA cutoff of US$ 1,335. US$1,335=100 percent) - Categories and counts: - >100=<150 (8) - >150<=300 (18) - >300 (12) - Countries by bracket: - >100=<150: Benin; Cambodia; Cameroon; Comoros; Kyrgyz Republic; Tajikistan; Zimbabwe; Senegal. - >150<=300: Bangladesh; Bhutan; Congo, Republic of; Cote d'Ivoire; Djibouti; Ghana; Honduras; Kenya; Kiribati; Kiribati appears twice? (as given); Mauritania; Nicaragua; Papua New Guinea; Sao Tome; Solomon Islands; Timor-Leste, Dem. Rep. of; Uzbekistan; Vanuatu. - >300<=? and >300 (12): Cabo Verde; Dominica; Grenada; Maldives; Marshall Islands; Micronesia; Moldova; Samoa; St. Lucia; St. Vincent and the Grenadines; Tonga; Tuvalu. ### Methodology summary for estimating SDG financing needs (Annex I) - Scope and approach: - Focus on five SDG sectors: education (SDG4), health (SDG3), road infrastructure (SDG9), electricity access (SDG7), and water and sanitation (SDG6). - Initial step: estimate unconstrained financing need for 136 developing countries. - Then impose absorption and other capacity constraints to estimate the most ambitious feasible path over next 5 years toward meeting SDGs by an illustrative target date (2040 used illustratively). - Uses nominal sectoral costs as exogenous inputs in a financial programming macroeconomic framework; includes fiscal multiplier effects to allow growth to be endogenously determined. - Data limitations: SDG costing and macro variables available for 96 countries (48 LICs and 48 EMs); extrapolation applied to remaining countries using median additional SDG needs in percent of GDP. - Absorption and capacity constraints: - Two caps imposed on growth in total public expenditure: (i) maximum annual increase; (ii) maximum cumulative increase sustained over a five-year period. - Caps based on observed historical episodes (80th percentile of change in total expenditure in percent of GDP for relevant subsamples over 1999-2019). - Rationale: beyond certain thresholds, additional public spending can trigger macro imbalances (inflation, current account deficits) and be thwarted by technical/institutional capacity or supply bottlenecks. ### Key quantitative findings and scenarios - Unconstrained scenarios to meet SDGs by 2030 (cumulative 2025-29): - Unconstrained scenario total: 2.1, 2.2, 2.3, 2.5, 2.6 (annual 2025–2029) and cumulative 11.7 (2025-29) — presented as "Unconstrained scenario" in Annex I Table 1. - LICs unconstrained annual: 0.6, 0.8, 0.9, 0.9, 1.0 (2025–2029) cumulative 4.2. - EMs unconstrained annual: 1.5, 1.4, 1.5, 1.5, 1.6 (2025–2029) cumulative 7.5. - Linear unconstrained scenario (gradual increase toward 2030): - Total annual: 1.4, 1.6, 1.8, 2.1, 2.4 (2025–2029) cumulative 9.2. - LICs annual: 0.3, 0.4, 0.5, 0.5, 0.6 (2025–2029) cumulative 2.3. - EMs annual: 1.0, 1.2, 1.3, 1.5, 1.8 (2025–2029) cumulative 6.9. - Constrained 2040 illustrative scenario (linear progression, public spending caps applied): - Staff estimate for 2025-29 to progress significantly toward SDGs with target extended beyond 2030: total US$3.5 trillion needed over 2025-29. - Public sector could cover US$2.7 trillion (around 80 percent of total) over 2025-29 assuming sufficient financing and capacity. - Private sector residual: US$0.8 trillion over 2025-29. - Country- and group-level metrics: - Median additional annual financing needs for LICs over 2025-29: 4.0 percent of GDP. - Median additional annual financing needs for EMs over 2025-29: 2.6 percent of GDP. - In absolute terms EMs needs are more than four times LICs needs due to larger GDP. - Public sector potential coverage: LICs ~50 percent of total needs over period; EMs ~90 percent. ### Fiscal mobilization and financing mix - Assumed fiscal mobilization: - Scenario assumes a 3-percentage point increase in the tax-to-GDP ratio for the median developing country over the next 5 years. - Modeled increase could cover up to US$1.3 trillion of the US$2.7 trillion public sector additional financing (around 50 percent of public sector needs). - Remainder of public financing would need to come from additional domestic and external financing sources. - Assumptions on fiscal multipliers and growth: - EMs fiscal multipliers used: 0.4, 0.5, 0.4, 0.3, 0.2, 0.1 for years 1 to 6. - LICs assumed multipliers equal to 50 percent of EM values. - Growth effects from scaling up spending are allowed but capped (example cited: 5.1 percent one standard deviation above average real growth rate 1999-2019). ### Policy-relevant implications and constraints - Meeting SDG targets by 2030 is unlikely due to: - Staggering financing requirements (unconstrained cumulative needs for 2025-29 between US$9 and 12 trillion). - Absorption and institutional capacity limits that make rapid public spending scaling unsustainable without macroeconomic imbalances. - Feasible near-term strategy: - Extend target date (illustratively to 2040) and adopt a constrained linear scaling-up of public SDG spending to maximize feasible implementation over 2025-29. - Emphasize a mix of domestic revenue mobilization (aiming at a substantive increase in tax-to-GDP), additional domestic financing, and external financing, with private sector expected to cover residual gaps albeit limited in the near term. - Importance of policy frameworks: - Macroeconomic stability and strengthened institutional capacity are critical to attract private financing and to expand the feasible share of public implementation. - The 3-percentage point tax effort over five years is ambitious but framed as a break from past trends requiring strong reform commitment and international support. *Source: Appendix II and Annex I content in the IMF document provided.* ### Annex I. Table 4. Summary Table Estimation of Additional Financing Needs ### Annex I. Table 4. Summary Table Estimation of Additional Financing Needs for 2025-29 to Meet the SDGs by 2040 (in trillions of U.S. dollars, based on Apr 2025 WEO) ### SDG Costing Exercise and Financing Tool with Capacity Constraints (Annex I. Box 1) - Goal and sample: - The SDG costing exercise by Gaspar and others, (2019) estimates additional annual spending required to achieve meaningful progress on the SDGs in five key areas. - Estimates are available for a sample of 155 countries: 49 low-income developing countries, 72 emerging markets, and 34 advanced economies. - Key findings from Gaspar and others (2019): - Delivering the SDG agenda for LICs will require an annual spending flow for education and health expenditure in year 2030 of US$ 0.2 trillion. - An additional “annualized stock” of infrastructure in roads, electricity and water and sanitation is estimated at US$0.3 trillion by year 2030. - The total amount of needs for LICs in both education and health and infrastructure in year 2030 is US$ 0.5 trillion. - An additional US$ 2.1 trillion would be needed in year 2030 for EMs in the same sectors. - Formulation and time profile: - The costing exercise expresses SDG financing needs as: 1) recurrent education and health spending, and 2) an annualized amount (fixed in percent of GDP) for infrastructure spending, both in percent of 2030 GDP in 2020 constant dollars. - After 2030, education and health spending would recur, whereas infrastructure spending would be expected to decline to cover depreciation of the capital stock built through 2030. - To translate to required financing over any period, properly discounted values of annual infrastructure spending should be added to annual health and education spending flows. - Updates and extensions: - Carapella and others, (2023) update Gaspar and others (2019): - Concludes that globally, additional spending required to achieve a strong performance in the selected SDGs in 2030 amounts to $3 trillion (3.4 percent of 2030 world GDP). - The average additional SDG cost of LIDC group is estimated at 16.1 percent of 2030 GDP, while EMEs face additional spending amounting to 4.8 percentage points of their GDP in 2030. - Aggarwal and others, (2024) include climate risks (adaptation and mitigation) for selected SDG sectors: - Concludes that an additional annualized US$3.4 trillion is required by 2030—an increase of US$0.4 trillion compared to estimates that do not account for mitigation and adaptation needs within these sectors. - The study focuses on mitigation and resilience efforts within SDGs 3, 4, and certain targets within SDGs 6, 7, and 9 and does not estimate financial requirements for achieving climate objectives in other SDGs. ### Estimated Financing Needs by Sector and Funding Source (2025-29) - Aggregate amounts (in trillions of U.S. dollars) for 2025-29: - Total Financing Needs: EMDEs 3.5; LICs 0.9; EMs 2.6 - Public sector: EMDEs 2.7; LICs 0.5; EMs 2.2 - Domestic Revenue mobilization: EMDEs 1.3; LICs 0.2; EMs 1.0 - Other (public): EMDEs 1.4; LICs 0.3; EMs 1.2 - Private sector: EMDEs 0.8; LICs 0.4; EMs 0.4 - Median annual needs (% GDP) for 2025-29: - EMDEs 3.3 percent of GDP - LICs 4.0 percent of GDP - EMs 2.6 percent of GDP ### Defining Expenditure Ceilings for the Annual SDG-Related Public Expenditure (Annex I. Box 2) - Methodology to derive expenditure caps: - Public expenditure caps are derived from historical observations of public spending increases between 1999 and 2019, with common caps set for subsamples of EMs and LICs rather than country-by-country constraints. - Steps: 1. Identify the 80th percentile of one-year change in total public expenditure for each country (considering only positive changes) over the 2009-19 period. 2. Define expenditure quartiles for LICs and EMs (one observation per country). 3. Merge quartile information with the two subsamples (EMs and LICs) with all observations for 2009-2019, and compute the 80th percentile of one-year and five-year public spending increase for each subsample. - Use of caps over time: - The resulting 80th percentile values are used as the one-year and five-year expenditure caps. - The one-year cap is binding in the first year; years 2-4 spending may grow cumulatively up to the five-year maximum. - At year 6, public spending can grow again by the annual cap and increase to a new 5-year cap (incremental to the previous cap) from year 7. - The process repeats every 5 years until 2040. - Reported caps (80th percentile within subsample for EMs and LICs’ quartiles) — change in total public expenditure in percent of GDP: - LICs (Quartile — One Year — Five Years): - Quartile 1: One Year 11.6; Five Years 3.4 - Quartile 2: One Year 22.8; Five Years 4.5 - Quartile 3: One Year 34.0; Five Years 5.2 - Quartile 4: One Year 49.8; Five Years 11.9 - EMs (Quartile — One Year — Five Years): - Quartile 1: One Year 11.5; Five Years 2.6 - Quartile 2: One Year 22.4; Five Years 3.1 - Quartile 3: One Year 33.6; Five Years 5.8 - Quartile 4: One Year 45.9; Five Years 5.9 ### Fragile and Conflict-Affected States (Annex II) — Scale, Vulnerabilities, and Key Statistics - Definition and scale: - Fragile and conflict-affected states (FCS) constitute a group of 39 economies that are home to one billion people. - Recent trends and human costs: - The years 2021, 2022, and 2023 have been the most violent in terms of battle deaths since the end of the Cold War, with an estimated 600,000 fatalities (Rustad, 2024). - Research organizations estimate that 200,000 battle-related deaths occurred in one year between July 2023 and June 2024 (Mia, 2024). - In 2020, the average duration of conflicts exceeded 30 years (Petrini, 2021). - A record 122.6 million people have been forcibly displaced (UNHCR, 2024). - Economic vulnerability: - FCS are more exposed to external shocks (pandemics, climate events, commodity price volatility) and can have destabilizing regional spillovers (cross-border insecurity, forced displacement, trade disruptions). - IMF research: three years after an extreme weather event, FCS experience cumulative losses of about 4 percent of GDP compared to just 1 percent in other economies (Jaramillo and others, 2023). - Per capita incomes in FCS are projected to remain below pre-pandemic levels beyond 2025. - By 2025, the gap with pre-crisis per capita income trends is set to remain larger for FCS than for other countries. - Debt distress risk: almost ¾ of FCS using the LIC DFS are in, or at high risk of, debt distress, compared with 41 percent of non-FCS LIC DSF countries (IMF, 2024e). - Vulnerability to food insecurity: - Currently, 19 of the 21 early warning hunger hotspots identified by FAO and WFP are in FCS, including Sudan and South Sudan, the Sahel, the Democratic Republic of Congo, Haiti, Nigeria or Yemen (FAO/WFP, 2024). ### The Fund’s FCS Strategy — Key Highlights and Capacity Development - Strategy adoption and objectives: - The IMF revamped engagement following the adoption of the 2022 IMF Strategy for Fragile and Conflict-Affected States (IMF, 2022c), establishing a new operating framework for strengthening and scaling up support to FCS. - Principal elements of the Strategy: - Enhanced tailoring of Fund engagement to country-specific drivers of fragility and conflict, implemented through Country Engagement Strategies (CES). - Twenty CES informed Article IV consultations or program reviews in countries including Burkina Faso, Iraq, Mozambique, Solomon Islands, South Sudan, and Somalia. - Example: Somalia — CES highlighted insecurity, poor infrastructure, and lack of skilled labor; CD focused on tax policy, revenue administration, and public financial management; technical assistance for macroeconomic statistics integrated with an Extended Credit Facility arrangement. - Addressing macro-critical dimensions of fragility and conflict in surveillance and analytics through policy reports, regional outlooks, staff working papers, and technical notes on topics such as shocks on growth, inflation and public debt; terms of trade shocks and conflict; political instability and exclusion; conflict impacts in the Middle East; migration impacts from the Venezuelan crisis; climate vulnerability and fragility; cash management and statistical capacity building; and the nexus between macroeconomic policies and conflict prevention. - Ensuring CD is better tailored to FCS conditions by designing implementable CD projects, realistic RBM milestones and indicators, proper sequencing (basic needs first), and higher implementation flexibility. - Scaling up CD to support institution building in FCS: - In FY25, about a quarter of Fund-provided CD assistance (about US$44 million) has been allocated to FCS in areas including public financial management, DRM, strengthening central banks, improving economic statistics, and governance and anti-corruption efforts. - Since adoption of the FCS Strategy, institution-building intensified through deployment of Long-Term Experts (LTX) in Regional Capacity Development Centers and recipient countries. - Enhanced engagement model and in-country presence: - The Fund expanded its presence by hiring 26 local economists in FCS such as Ethiopia, DR Congo, Guinea Bissau, Niger, Iraq, South Sudan, Somalia, and Yemen. - Seven new Resident Representative offices were opened in Burundi, Comoros, Lebanon, Papua New Guinea, São Tomé and Príncipe, South Sudan and a joint office for Iraq and Yemen (based in Jordan). - CD scale-up and personnel: - Since adoption of the FCS Strategy, 29 additional long-term experts have been placed in countries and in Regional Capacity Development Centers; a total of about 100 LTX are supporting FCS. - Country examples of CD support: - Public financial management strategy in Chad; tax forecasting in Mali; blockchain for wage bill control in Guinea-Bissau. - Modernizing central bank operations and financial sector supervision in Mozambique and Somalia; CPI compilation assistance in Iraq; quarterly GDP estimates support for Haiti; strengthening banking supervision. - Macroeconomic frameworks and forecasting assistance in Papua New Guinea and Timor-Leste. - Statistics updates for national accounts in Chad; monetary data, public sector debt, and government finance statistics support in Yemen. - IMF financial support history and pandemic response: - Between January 2010 and December 2021, the IMF supported 28 FCS with 88 programs and financing totaling US$20 billion. - During the pandemic, 28 FCS members received emergency IMF financial support worth US$7.5 billion while Fund staff conducted over 1,000 remote CD engagements with FCS. *Source: Fund staff estimates (from Annex I and Annex II of the provided content).* ### 7. The Fund’s lending to FCS remains significant. Since August 2020, the IMF has provided ### 7. The Fund’s lending to FCS remains significant. Since August 2020, the IMF has provided ### IMF lending and emergency financing to Fragile and Conflict-affected States (FCS) - The IMF has provided over US$44.3 billion in combined emergency financing and upper credit tranche (UCT) commitments to FCS since August 2020. - Fifteen IMF-supported programs worth US$24.4 billion are currently operational in countries including Burkina-Faso, Cameroon, Central African Republic, Comoros, the Republic of Congo, Ethiopia, Guinea-Bissau, Kosovo (precautionary), Mozambique, Niger, Papua New Guinea, Somalia, and Ukraine. - US$10.4 billion in emergency financing have been committed to 22 FCS since the start of the pandemic, including support to Burkina Faso, Haiti, South Sudan, and Ukraine. - Cameroon, Democratic Republic of Congo, Kosovo, and Niger are supported through the RSF. - One FCS, Haiti, is implementing a Staff Monitored Program. ### Program design and conditionality for FCS - Programs for FCS make use of flexibility in the lending toolkit. - Program design is characterized by parsimonious and tailored conditionality aligned with institutional capacity and informed by the CES. ### Fund support modalities relevant for FCS - Emergency financing, UCT-quality programs, RSF support, and Staff Monitored Programs are employed to tailor responses to FCS circumstances. *Italic: Contribution of the IMF to the International Financing for Development Agenda — excerpt (chapter/annex content).* ### Annex III. IMF engagement with Small Developing States (SDS) ### SDS membership and classification - The Fund has 43 small state members with a population under 1.5 million. - 34 of these are considered SDS after removing advanced economies and high-income fuel exporters. - This represents around 18 percent of the Fund’s 191 member countries. - SDS are heterogeneous and present in all regions, with a large share being island states in the Caribbean and the Pacific. ### SDS subgroupings (as defined in the source) - Tourism-based countries: international tourism arrival receipts exceed 15 percent of GDP and 25 percent of total exports (World Bank WDI data). - Commodity exporters: SDS with fuel or nonfuel primary products as the main source of export earnings (SDS in Table D of the WEO Statistical Appendix, April 2024). - Fragile states: SDS classified as Fragile and Conflict-affected States by the IMF (FY24 list). - Microstates: population below 200,000. - Four countries not in the above groupings: Bhutan, Djibouti, Eswatini, and Trinidad and Tobago. ### Economic challenges faced by SDS - Smallness limits economies of scale and private sector development; significant emigration due to limited domestic job opportunities. - Lack of economic diversification heightens exposure to sector-specific shocks and external balance of payments vulnerabilities. - Disproportionate vulnerability to climate change and natural disasters: - Between 1960-2020, SDS accounted for 55 percent of global natural disasters causing 20-30 percent of GDP in damages and 70 percent of natural disasters with damages exceeding 30 percent of GDP (IEO 2022). - Large but capacity-constrained public sectors due to high fixed costs of public service delivery and limited absolute numbers of skilled public employees. ### Fund response and stepped-up engagement with SDS - Following the IEO Evaluation Report (2022), the Fund implemented a Management Implementation Plan (MIP) to enhance surveillance, CD, lending engagement, and continuous staff presence tailored to SDS. - The Fund is providing significant support and taking steps to further increase engagement, including facilitating access and tailoring support across surveillance, lending, and CD. ### Resource allocation and lending for SDS - SDS constitute 0.2 percent of the global population, 0.13 percent of global GDP, and 0.39 percent of the IMF’s quota. - Almost 9 percent of Fund resources are dedicated to work on SDS: - 40 percent of that is devoted to surveillance. - 40 percent to capacity development. - 20 percent to lending (IEO 2022). - SDS have made frequent use of emergency financing in the last two decades, peaking during the 2020 pandemic. - The number of UCT-quality programs in SDS is increasing amid slow post-pandemic recovery and consecutive shocks. - As of December 2024, three SDS—Barbados, Cabo Verde, and Seychelles—have benefited from financing from the RST. - Eligibility adjustments for small states: - PRGT entry and exit cut-offs for small states are set at two and three times the IDA operational cut-off, respectively (versus the standard cut-offs). - For the RST, members are eligible if their per capita GNI in 2020 does not exceed 25 times the 2021 IDA operational cutoff, as opposed to 10 times for other countries. ### Surveillance and capacity development (CD) for SDS - Nearly all SDS benefit from at least one physical Fund mission per year; support is flexibly scaled up when needed (e.g., after natural disasters). - In 2023, the Fund devoted US$25.2m to capacity development activities in SDS. - Regional CD centers provide cost-efficient and rapid CD delivery to SDS. - An updated SDS Staff Guidance Note (published in 2024) outlines evolving engagement areas: climate, gender and inclusive growth, governance, digitalization, and collaboration with development partners. - Country Engagement Boxes for SDS Article IV Staff Reports were introduced to improve strategic engagement and traction. ### Outreach and internal processes to support SDS - Dedicated regional SDS events during Spring and Annual meetings, and seminars to familiarize SDS authorities with Fund lending tools (UCT toolkit, UCT-quality program benefits, RSF/RST). - An interdepartmental SDS working group coordinates Fund work on SDS, reporting to Fund management on support provided, including limiting mission chief and staff turnover and supporting CD missions and trainings. - Internal seminars and a Fund-wide SDS week (2024) encourage knowledge-sharing and peer learning among Fund staff. *Italic: Contribution of the IMF to the International Financing for Development Agenda — annex content (Annex III).* ### Annex IV. Analysis of Capacity Development (CD) delivery to developing countries ### CD’s role and expansion - CD strengthens institutional capacity and governance for effective policy design and implementation, focusing on areas of IMF comparative advantage: central bank operations, monetary policy, financial regulation and supervision, tax and spending policy, macroeconomic and financial statistics, and debt management; and targeted support in governance, anti-corruption, gender, inclusion, digitalization, and climate action. - CD spending has increased dramatically over the last 60 years with marked acceleration in the past two decades; pandemic-related virtual transition contributed to a temporary dip in CD spending between 2019 and 2021. - By 2023, CD activities accounted for 30 percent of the Fund’s country operations (IMF, 2024g). ### CD allocation by country group and trends - LICs receive the biggest share of CD activities delivered to developing economies: LICs account for more than 40 percent of CD activities on average. - Emerging Markets (EMs) received about 25 percent. - CD delivery to developing economies increased with a 40 percent rise in the number of CD activities between 2022 and 2024. - Fragile and conflict-affected states (FCS) exhibited the most substantial growth: a 54 percent increase over the same period. - LICs, FCS, and SDS together represented nearly 70 percent of single-country CD delivery spending in 2023 (IMF, 2024g). ### CD focus areas and contribution to financing for development - Two of every three CD activities are dedicated to workstreams that contribute to financing for development. - Traditional IMF CD workstreams are: macroeconomic framework, monetary and financial system, public finances, statistics, and legal frameworks. - Between 2022 and 2024: - Public finances represented more than half of total CD activities. - Monetary and financial systems represented nearly 20 percent. - CD activities address fiscal frameworks, spending efficiency, revenue mobilization, debt management, financial supervision and regulation, central bank operations, debt management, monetary and macroprudential policies, systemic risk analysis, financial crisis management, payment systems, and AML/CFT frameworks. ### Delivery modality innovations and reach - The Fund transitioned swiftly to virtual CD delivery during the COVID-19 pandemic and later adopted hybrid models combining virtual and in-person delivery. - Virtual components broadened access and reduced costs; in-person reserved for hands-on collaboration. - The “new normal” CD delivery is evolving toward a programmatic approach blending synchronous in-person and virtual CD with asynchronous online content (IMF, 2024g). ### CD effectiveness and recipient perceptions - The AidData survey of CD recipients across 60 low- and middle-income countries supports the view that IMF CD is influential and highly beneficial (Annex IV Figure 5; IMF, 2024g and Annex IV Box 1). - AidData survey details: - Nearly 80 percent of responses came from countries prioritized by the IMF as heavy users of Fund CD. - Regional distribution of responses: Africa 53 percent, Asia & Pacific 23 percent, European countries 11 percent, Middle East & Central Asia 7 percent, Western Hemisphere 6 percent (IMF, 2024f). - Survey respondents prefer Fund CD in areas of unique expertise: central banking, macroeconomic diagnostics and statistics, financial sector stability, regulation and supervision, and revenue mobilization. - RBM framework data demonstrate strong progress in achieving intended CD outcomes. ### 2023 CD Strategy Review (CDSR) priorities (Annex IV Box 1) Key priorities to enhance flexibility, integration, and tailoring of Fund CD: - Strengthening prioritization and integration with surveillance and lending. - Enhancing the funding model by diversifying and sustaining funding, strengthening donor partnerships, and streamlining mechanisms. - Enhancing impact with measurable results and improved coordination with development partners. - Modernizing modalities: blended learning and virtual tools. - Expanding field presence to increase in-country representation, especially in fragile and conflict-affected settings. - Adapting the HR model to improve recruitment, retention, and capacity-building for CD experts. *Italic: Contribution of the IMF to the International Financing for Development Agenda — annex content (Annex IV).* ### Annex IV. Figure 4. Perceived Helpfulness of IMF CD ### Annex IV. Figure 4. Perceived Helpfulness of IMF CD ### Perceived Helpfulness (AidData Survey — Figure values) - Very helpful: 0.38 - Quite helpful: 0.34 - Somewhat helpful: 0.22 - Not at all helpful: 0.03 - Don't Know / Not Sure: 0.03 ### Executive summary — key findings on Bank‑Fund collaboration - The IMF and the World Bank have continuously adapted and worked closely together since their establishment in 1944 to serve evolving member needs. - Institutional design and mandates are complementary: the Fund focuses on promoting macroeconomic and financial stability; the Bank focuses on development and structural transformation. - Collaboration spans all Fund activities—policy advice, capacity development, and lending—and thematic areas including the financial sector, fiscal sector, debt, and macro‑structural issues. - Two formal agreements govern collaboration: the 1989 Concordat and the 2007 Joint Management Action Plan (JMAP), complemented by numerous joint programs (e.g., joint FSAPs, joint LIC DSFs). - The 2020 IEO evaluation found Bank‑Fund collaboration on macro‑structural issues to be broad but uneven, recommending: - develop concrete frameworks in high‑benefit areas; - improve internal incentives to collaborate and address reluctance to engage with external partners; - improve access to and exchange of information and knowledge; - strengthen the IMF Board’s strategic oversight of external collaboration. - The 2021 Management Implementation Plan (MIP) committed to: - develop concrete frameworks for effective collaboration on strategic macro‑structural issues; - improve internal incentives for collaboration; - improve access to and exchange of information and knowledge—premised on additional staff resources. - A September 2023 Joint Statement by the Heads of the two institutions signaled further deepening of collaboration to help countries address transformative challenges (including climate change and digital transition) amid more frequent shocks, high debt levels, limited policy space, and rising geopolitical tensions. ### Mobilizing Domestic Resources — developments and operational approach - Collaboration on DRM has deepened given debt and development challenges; DRM covers fiscal revenues (tax and non‑tax), public spending efficiency/prioritization, and development of domestic financial markets. - Joint Domestic Resource Mobilization Initiative (JDRMI) launched in June 2024 with two operational pillars: - A systemic coordination mechanism: a memorandum of understanding at the global level establishing protocols for effective collaboration (including exchange of information, list of experts, and analytical tools); and joint country working groups and a Joint Matrix at country level (can include other partners). - A framework to integrate the three components of DRM (tax policy and administration, efficiency of public spending, development of domestic financial markets) and renewed cross‑functional operational frameworks in both institutions while respecting institutional settings. - Implementation status: Joint Matrices finalized and being implemented in four countries (including Pakistan and Paraguay publicly announced during the latest IMF‑World Bank Spring Meetings); a fifth country added more recently but broader difficulties slowed start. Early experience suggests enhanced integration increases efficiency only with strong commitment to reforms and sufficient authority capacity. ### Tax administration and international tax collaboration - TADAT (Tax Administration Diagnostic Assessment Tool), launched in 2014 by the IMF and the World Bank (with bilateral partners and the EU), provides objective assessments of key components of a country’s tax administration to help prioritize reforms. Over one‑fifth of TADAT assessments have World Bank participation (Figure 1), which increases credibility, relevance, and impact. - Platform for Collaboration on Tax (PCT), evolved from 2015/2016 efforts, includes the IMF, World Bank, OECD, and UN to: - formalize staff discussions on tax matters (including cross‑border issues); - analyze and support capacity building for developing countries; - support joint delivery of guidance on tax issues. - Current PCT priority areas include tax incentives, tax and climate, and the Medium‑Term Revenue Strategy (MTRS). The PCT produces regular outputs (joint guidance, webinars) with more planned. ### Operational coordination and knowledge sharing - Flexibility in collaboration formats (formal frameworks and informal arrangements) has allowed effective responses to evolving needs and member demands. - Examples of formal and joint work include joint assessments of financial sector soundness and joint debt sustainability assessments in low‑income countries. - The paper documents progress on enablers of collaboration, including: high‑level strategic engagement among managements; Fund HR guidance aimed at improving internal incentives for staff collaboration; and achievements in information and knowledge sharing. ### Institutional and historical context (selected specifics) - Membership alignment: to join IBRD a country must first join the IMF; membership in IDA, IFC, and MIGA conditional on IBRD membership. Currently two countries (Andorra and Lichtenstein) are IMF members (191 members) without being members of IBRD (189 members). - Since 1944, at least 25 agreements between the Fund and the Bank have specified collaboration modalities. *Source: AidData Survey; excerpt from "IMF COLLABORATION WITH THE WORLD BANK—A REVIEW OF RECENT EXPERIENCES" (May 22, 2025).* ### 11. The Bank and the Fund have a long history of collaboration on debt issues. Over the ### 11. The Bank and the Fund have a long history of collaboration on debt issues. ### Debt collaboration: history, frameworks, and recent initiatives - Collaboration forms: joint analytical work, coordination in international fora, and policy support during debt crises. - Key joint efforts: - Heavily Indebted Poor Countries (HIPC) initiative. - Joint IMF/World Bank Debt Sustainability Framework for Low Income Countries (LIC-DSF) since 2005. - Joint World Bank–IMF Multipronged Approach for Addressing Emerging Debt Vulnerabilities, first presented in 2018 (IDA, 2018, IMF and World Bank, 2018). - Joint work through the Debt Management Facility (DMF) and analytical tools for Medium-term Debt Management Strategy and Annual Borrowing Plan design and formulation. - DMF details: - A multi-donor trust fund jointly administered by the Bank and the Fund offering advisory services, training, and peer-to-peer learning to more than 80 developing countries. - Objective: strengthen countries’ debt management capacity, processes, and institutions; reduce debt-related vulnerabilities; improve debt transparency through capacity-building activities, tailored advisory services and TA, applied analytical work, training, and peer-to-peer learning. - Facilitates collaboration among TA providers and dialogue among stakeholders. - IMF and the World Bank are designing DMF Phase IV, scheduled to be presented to donors in the coming months. ### LIC-DSF: role and recent activity - Central role: "The joint IMF-World Bank LIC-DSF continues to play a critical role in Fund and Bank operations." - Since introduction in 2005, LIC-DSF central for Fund support to LICs for surveillance and lending. - Activity metric: Between 2019-24, the Fund and Bank teams completed 387 LIC-DSFs. - Review cycle: - The framework is periodically reviewed to reflect evolving debt vulnerabilities and analytical advances. - Last review approved by Executive Boards in 2017. - Ongoing review launched in 2024 and scheduled to be completed by mid-2026. ### DSSI, Common Framework, and the Global Sovereign Debt Roundtable (GSDR) - DSSI (2020-21): - Joint IMF-World Bank support helped implement a collective response to the COVID-19 pandemic. - Commitment: participating countries to use freed-up resources for social, health, or economic spending in response to the crisis; IMF and World Bank jointly monitored spending. - Participation: Forty-eight out of 73 eligible countries participated. - Relief amount: benefiting from an estimated US$12.9 billion in debt service relief over 2020-21. - Expiry: DSSI expired at the end of December 2021. - G-20 Common Framework for Debt Treatment Beyond the DSSI: - Adopted by the G20 and the Paris Club in November 2020 to provide common debt treatment between G20 and Paris Club creditors. - Common Framework cases supported by Fund and Bank: - Four restructuring cases: Chad (completed), Ghana and Zambia (almost completed), and Ethiopia (ongoing). - Joint reflections and numerous joint papers since 2021; regular joint presentations at the G20. - GSDR (launched February 2023): - IMF and World Bank co-chairmanship; active support to build stakeholder consensus to overcome restructuring bottlenecks. - Progress published through Cochairs Progress Reports and a Compendium of technical understandings reached by members since the launch. - In April 2025, the GSDR Cochairs published the “Restructuring Playbook” providing debtor country authorities with key steps, concepts, and processes. ### 3-pillar approach to help LICs and vulnerable EMs with debt service challenges - Pillars: - Pillar I: structural reforms and domestic resource mobilization. - Pillar II: financial support from multilateral and bilateral partners. - Pillar III: measures to crowd in new or higher private inflows at affordable costs, including greater use of risk-sharing instruments where relevant. - Requirement: implementation requires strong and deep collaboration between the IMF and the World Bank. ### Promoting financial stability: FSAP and FSSR collaboration - FSAP: - Purpose: thorough assessment of a country’s financial sector risks and vulnerabilities and financial stability policy frameworks. - Since inception in 1999, FSAPs in EMDEs are usually conducted jointly with the World Bank; in advanced economies the Fund conducts assessments alone. - Institutional roles in joint FSAPs: IMF leads on financial stability assessment; World Bank leads on financial development assessment. - Activity metric: Between FY19 and FY24, the two institutions conducted 24 joint assessments. - In EMDEs where joint FSAPs are not feasible, the World Bank undertakes the development module alone; since 2015, the World Bank has completed 20 such assessments. - Note: FSAPs are counted per fiscal year, with the date of the first joint mission signifying the beginning of the assessment. - FSSR: - Established in 2017; available to low and lower-middle income countries and fragile and conflict affected states. - Two components: (i) diagnostic of capacity to identify, monitor, manage, and mitigate financial stability risks; (ii) multi-year TA program developed with the recipient country and other Capacity Development providers. - FSSR diagnostics are carried out by the IMF alone; the subsequent multi-year TA program is coordinated with the World Bank, which provides TA in its expertise areas as part of the TA workplan. - Collaboration example: joint IMF-World Bank presentation on Somalia FSSR to the FSSF Steering Committee in December 2024. - Coordination mechanisms: - Joint IMF-World Bank Financial Sector Liaison Committee for program-level coordination. - Meetings at conclusion of every FSSR diagnostic mission and monthly meetings between divisions responsible for FSAPs and FSSRs to discuss requests, pipeline, and timelines. - World Bank participates in FSSF Steering Committee meetings; IMF participates in Finance for Development Partnership Council meetings. ### Operational synergies and areas of joint work within FSAPs and FSSRs - Joint FSAPs create a shared view of financial sector needs and coordinate approaches in member countries. - Intersections include financial sector regulation and supervision, digitalization, fintech, and climate change. - Example: Indonesia 2024 FSAP prepared by a joint Bank-Fund team with collaboration across banking supervision and climate risk analysis. - 2021 FSAP Review highlighted additional synergies in climate change and fintech; envisioned continued active operational dialogue to coordinate policy analysis and messages. - Cross-mission participation remains limited when institutions conduct standalone stability or development modules. - Practical joint mission example on climate: Fund expert undertaking climate risk analysis and Bank expert assessing supervisory/regulatory response to climate risks and climate finance. ### AML/CFT collaboration and engagement - Joint leadership: IMF and World Bank lead AML/CFT assessments alongside FATF and nine FATF-style Regional Bodies (FSRBs). - Reviews: 2018 and 2023 Reviews of the Fund’s AML/CFT Strategy; Executive Directors welcomed IMF contributions and encouraged continued cooperation with the World Bank and other IROs. - Coordination in CD and policy advice: - IMF staff coordinate extensively with TA providers, including the World Bank, through regular meetings to align CD delivery. - Joint efforts to address de-risking, pressures in correspondent banking relationships (CBR), and promote financial inclusion. - Joint project examples: - G20 Project for Enhancing Cross-Border Payments: IMF and World Bank co-developed the methodology for ML/TF risk assessment of a remittance corridor (Building Block 7: Safe Payment Corridors). - Pacific Island Countries: IMF CD project assessing ML/TF risks in remittance corridors; coordinated with a World Bank project to facilitate correspondent banking services in the region. - Civil society engagement: joint Civil Society Policy Forums during IMF-World Bank Annual and Spring Meetings; IMF staff engaged CSOs on the 2023 Review of the Fund’s AML/CFT Strategy and the measurement and mitigation of illicit financial flows in Africa in October 2024. - Forward look: in line with the 2023 Review, staff will continue to deepen engagement with the World Bank and other IROs to leverage partnerships, enhance synergies, avoid duplication, and focus on the IMF’s comparative advantage as a macroeconomic institution. ### Strengthening governance and public financial management - Increased collaboration: IMF-World Bank cooperation on governance and institutional frameworks has significantly increased to build capacity and tackle corruption and governance weaknesses. - 2018 Review of the 1997 Guidance on Governance: Executive Directors called for increased cooperation with the World Bank; the 2023 Review of the 2018 Governance Framework confirmed increased collaboration. - Bank inputs: CPIA, procurement expertise, and other Bank analyses inform IMF surveillance, lending, and capacity development. - Operational examples: - World Bank staff support prioritization of engagement areas, participate in governance brainstorming, and support IMF’s Governance Diagnostic Reports. - Joint work on public procurement and in many countries on key state-owned enterprises. - During the COVID-19 emergency financing peak, World Bank procurement experts and IMF AML experts collaborated on transparency of beneficial ownership of companies awarded public contracts and publication/follow-up of audits of emergency spending. - IMF capacity: Fund has strengthened expertise on anti-corruption and rule of law, with dedicated anti-corruption staff, while continuing coordination where the World Bank has comparative advantages (e.g., asset recovery via World Bank/UNODC Stolen Asset Recovery Initiative (StAR)). ### Public investment management and PPP risk assessment - Joint IMF-World Bank engagement on public investment management is well entrenched. - World Bank participation: invited to all Public Investment Management Assessments (PIMA) and Climate Public Investment Management Assessments (Climate-PIMA) undertaken by the IMF. - Activity metrics: - More than 100 PIMAs conducted to date. - 50 Climate-PIMAs conducted to date. - Joint tools: IMF and World Bank jointly developed the PPP Fiscal Risk Assessment Model (PFRAM) to help countries assess risks from individual and portfolios of PPPs. *Source: ppea2025022 - 11. The Bank and the Fund have a long history of collaboration on debt issues.* ### 25. The Bank-Fund collaboration on social spending and on closing gender gaps has ### 25. The Bank-Fund collaboration on social spending and on closing gender gaps has ### Collaboration on social spending and closing gender gaps - Institutional and policy frameworks: - Collaboration guided by: "2019 IMF Strategy for Engagement on Social Spending", "Operational Guidance Note and Sectoral Notes", "2022 IMF Strategy Toward Mainstreaming Gender", "2024 Interim Guidance Note on Mainstreaming Gender at The IMF", and the "2021 Management Implementation Plan". - Institutional-level arrangements: - World Bank participation in Senior Gender and Inclusion Accountability Group (SGIAG) meetings at the IMF to set agenda on inequality, social spending, and incidence analysis. - IMF’s Fiscal Affairs Department (FAD) closely collaborates with the World Bank on education, health, and social protection issues. - Country-level practice and examples: - World Bank leads public expenditure reviews and granular social protection scheme design tailored to country contexts. - Ecuador example: - 2019 Extended Fund Facility (EFF) required an action plan (with World Bank TA) to improve efficiency and quality of primary education and health spending. - 2020 EFF upgraded the social registry (with World Bank TA) and expanded social assistance to cover 80 percent of families in the lowest income deciles. - Collaboration on reducing gender gaps: - 2022 Strategy identified four broad areas for Bank-Fund collaboration: analytical research, country-specific research, knowledge sharing, and data sharing. - Practical activities include workshops on model applications, seminars, symposia, joint panels, Bank support for IMF training material and course delivery, and World Bank input into IMF country reports and key selected indicators tables. - The 2024 book on Sub-Saharan Africa included chapters by the World Bank and other development partners. - Country analysis uses World Bank inputs to identify legal barriers to women's economic empowerment. ### Building resilience against climate change and pandemics - Resilience and Sustainability Facility (RSF): - RSF approved by the IMF’s Executive Board in 2022 to provide affordable longer-term financing for low-income and vulnerable middle-income countries undertaking macro-critical reforms to reduce risks to prospective balance of payments stability, including climate change and pandemic preparedness. - RSF reform packages draw on World Bank’s Country Climate and Development Report (CCDR) and IMF analytics, such as the Climate Policy Diagnostic (CPD) and Climate PIMA. - The World Bank provides assessment letters to the IMF Board for RSF requests and reviews, and in some cases provides TA to support RSF Reform Measures implementation. - Enhanced framework to scale-up climate action: - Established in May 2024 via a Joint Statement by the Heads of the IMF and the World Bank. - Three underpinning principles: - i) countries, the World Bank, and the IMF work together closely to identify each country’s climate challenges and priority policy reforms, informed by high quality assessments by the Fund and the Bank and countries’ own climate ambitions; - ii) the IMF and the World Bank work with other MDBs and development partners to help countries implement reforms through TA and financing; - iii) upon request, the IMF and the World Bank help establish country-led platforms designed to mobilize additional climate finance, including from the private sector. - Three RSF arrangements piloted under this enhanced framework: Madagascar (June 2024), Tanzania (December 2024), and Egypt (March 2025). - The "RSF Guidance Note Update" provides operational details for Bank-Fund cooperation in RSF discussions. - Pandemic preparedness collaboration: - October 2024 agreement among the IMF, the World Bank, and WHO on broad principles for cooperation on pandemic preparedness, aligning RSF-supported reforms, World Bank-supported policy reforms and investments, and WHO technical and operational support. ### Enablers of collaboration - High-level strategic engagement: - 2021 MIP outlined four levels of senior management collaboration: - (i) IMF Managing Director and World Bank President on strategic policy issues; - (ii) relevant Deputy Managing Director (DMD) and World Bank’s Managing Director of Operations (MDO) for complex country cases; - (iii) senior management teams of IMF area departments and World Bank Regional Vice Presidents to harmonize country policy views; - (iv) topic-specific meetings between Directors of Functional Departments and relevant Bank counterparts. - Since 2021 the frequency and intensity of strategic-level meetings have deepened: - Meetings between the two Heads now take place on a regular basis. - One IMF DMD responsible for the World Bank relationship and the World Bank MDO meet on a monthly basis. - Meetings between senior staff of IMF area and functional departments and World Bank counterparts are frequent. - Improving internal incentives for collaboration: - Fall 2021 revision of the Guidance Note for Departments/Senior Personnel Managers to use the HR performance management system to promote Bank-Fund collaboration. - Guidance includes assigning institutional team objectives promoting collaboration and collecting multisource feedback through the performance management process and Workday system (World Bank staff provide offline feedback as they do not have Workday access). - Management committed in the 2021 MIP to review experience with the HR Guidance. - Evidence of changing incentives: - Review of staff annual performance review (APR) forms covering FY2021 – FY2024 used automated keyword search for “World Bank”. - Results show an increase in staff referencing the World Bank in their APRs, reflecting growing acknowledgement of Bank engagement in performance assessment. - Improving information and knowledge sharing: - 2022 joint Guidance Note on information sharing sets good practices across country operations, TA, and policy work; practices include active participation in internal review processes, routine sharing of country data, systematic upstream exchange of views, cross-mission participation, access to TA reports, and sharing rosters of long-term experts. - February 2025 survey of IMF mission chiefs on familiarity with and helpfulness of the Guidance Note: - Over ¾ of the mission chiefs that responded are aware of the Guidance Note. - Close to half indicated that they have consulted it in their engagement with the Bank over the past three years. - Just over half of respondents indicated that at least one element of information sharing between staffs has improved since 2022. - Most-cited improvements: routine sharing of country data, followed by cross-mission participation and active participation in internal review processes and key meetings. - A reported challenge: collaboration often remains driven by individual Mission Chiefs rather than fully institutionalized processes. ### Conclusions and patterns of collaboration - Anchoring documents and flexibility: - Collaboration anchored in the 1989 Concordat, 2007 Joint Management Action Plan, and 2023 Joint Statement by the IMF Managing Director and the World Bank President on transformative challenges. - Flexibility in collaboration formats has enabled tailored and agile solutions for members. - Areas of significant deepening: - Long-standing collaboration areas such as debt, DRM, and financial sector have seen significant deepening, notably since the COVID-19 pandemic, including implementation support for the DSSI and the Common Framework, and advancement of the Global Sovereign Debt Roundtable. - Launch of the Joint DRM Initiative and implementation of the 3-pillar approach exemplify recent deepening. - Formal frameworks where needed: - Climate action scaled-up via formal Bank-Fund collaboration framework leveraging analytics, TA, financing, policy expertise, and co-convening power (climate finance round tables); operationalized through the RSF Guidance Note Update. - Successful expansion without formal frameworks: - Gender work expanded through diagnostic tools for surveillance and capacity development, joint trainings, knowledge events, and World Bank inputs to IMF gender indicators in country reports, even without a formal engagement framework. *Source: IMF collaboration review text (pp. 17–23 of the supplied content).* --- _Source: https://www.imf.org/-/media/files/publications/pp/2025/english/ppea2025022.pdf_