## 1. Sample Countries

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---

### Overview of the DSF and DSA
- The Debt Sustainability Framework (DSF) for low-income countries (LICs) was developed jointly by the IMF and the World Bank as a standardized analytical tool to monitor debt sustainability in LICs.
- Objectives include guiding LICs’ borrowing decisions and detecting potential crises early to suggest preventive action by country authorities.
- A key element introduced in 2005 is the Debt Sustainability Analysis (DSA), which assesses countries’ risk of debt distress rather than debt sustainability per se.
- To date, well over 300 LIC DSAs have been conducted for 73 countries.
- LIC DSAs are required annually for PRGT-eligible countries and are typically included with Board reviews of IMF programs or in the context of Article IV surveillance discussions.

### Structure and components of DSAs
- Since 2007, each LIC DSA has included two components:
  - External DSA: debt dynamics driven by the non-interest current account balance, net foreign direct investment, and endogenous debt dynamics (including contributions from interest rates, GDP growth, inflation, and exchange rate changes).
  - Public DSA: driven by the primary fiscal balance.

### Historical context and past initiatives
- 1970s–1980s: strong increases in mostly external debt prompted multilateral debt relief initiatives.
- HIPC Initiative launched in 1996: led to debt relief in 36 out of 39 countries eligible for HIPC assistance.
- MDRI complemented HIPC from 2005 by providing full debt relief on eligible debt from the IMF, the International Development Association (World Bank), and the African Development Fund (African Development Bank).
- By the 2000s many LICs achieved stronger and sustained growth and overall economic performance, responding relatively well to shocks at the end of the decade.

### Vulnerabilities, recent trends, and policy environment
- LICs remain vulnerable to external shocks due to remaining policy weaknesses and narrow export bases.
- Debt ratios deteriorated following the global crisis because of higher financing requirements and a weaker growth outlook.
- Most LIC debt financing has been highly concessional; many LICs are beginning to take on higher cost, non-concessional debt as they develop.
- Reforms to the IMF’s debt limits policy in 2009 moved to a menu of options based on assessments of LICs’ debt vulnerabilities and capacities.
- Development of domestic debt markets is increasing in some LICs, which can reduce exposure to foreign interest rates and currency risk but often at the cost of much higher domestic interest rates.
- Future aid flows are a concern: IMF (2009a) highlights lower-than-committed aid flows since the crisis, potentially compensated by new official lending from emerging countries, including China, India, and Gulf oil exporters.

### Key assumptions and implications for debt sustainability
- Continued LIC debt sustainability depends critically on post-crisis assumptions:
  - That the shock to external demand is temporary and has no long-term growth impact.
  - That LICs will unwind counter-cyclical policies and continue to have access to adequate financing.
- Projections of decreasing debt ratios over time rely on assumptions about policy responses by LICs throughout the projection period and the implied growth dividend of debt-financed public investment over the long run.

### Purpose and scope of the paper using the sample
- The paper analyzes projections from existing DSAs across three periods around the global economic crisis to examine projected trajectories of debt ratios for a sample of LICs.
- Uses data from earlier external DSAs to analyze the evolution of LICs’ external debt, which still constitutes the bulk of their public debt.
- Section II discusses motivation and sample data; Section III observes key baseline ratios over three time periods, including evolution of debt and debt service numerators and scaling variables (output, exports, and revenues—denominators); Section IV offers conclusions.

### Sample countries referenced in figures
- Angola; Bangladesh; Bolivia; Burkina Faso; Cameroon; Chad; Comoros; Djibouti; Georgia; Ghana; Guyana; Honduras; Lao PDR; Lesotho; Mauritania; Moldova; Nepal; Papua New Guinea; Solomon Islands; Tajikistan; Tanzania; Tonga; Vietnam; Cambodia; Dominica; Kyrgyz Republic; Mozambique; Yemen.

---

### Box 1. The External Debt Sustainability Analysis (DSA)

#### Overview and mechanics
- The external DSA consists of:
  - a forward-looking analysis of a country’s projected external debt and debt service dynamics over the next 20 years (baseline scenario) and its vulnerability to external and policy shocks (alternative scenarios and bound-tests);
  - an assessment of the risk of debt distress, based on indicative debt burden thresholds that depend on the quality of the country’s policies and institutions;
  - recommendations on a borrowing (and lending) strategy that limits the risk of debt distress.
- “External public debt” refers to external (residency criterion) public and publicly guaranteed debt.
- All debt burden indicators are expressed in present value terms.

#### Key debt-burden indicators and thresholds
- Five key debt burden ratios in the external DSA:
  - debt-to-GDP
  - debt-to-exports
  - debt-to-revenues
  - debt service-to-exports
  - debt service-to-revenues
- CPIA scores (averages of 16 indicators) classify countries into weak/medium/strong performers; a three-year moving average CPIA score is used.
- Debt Burden Thresholds under the DSF (NPV of debt in percent of Exports / GDP / Revenue; Debt service in percent of Exports / Revenue):
  - Weak Policy: 100 / 30 / 200 ; 15 / 25
  - Medium Policy: 150 / 40 / 250 ; 20 / 30
  - Strong Policy: 200 / 50 / 300 ; 25 / 35
- Note: Debt-service-to-revenue thresholds were revised lower in February 2010 to 18, 20, and 22 percent for weak, medium, and strong policy performers, respectively.

#### Scenarios and stress tests used
- Baseline: 20-year forward projection.
- Alternative scenarios and bound tests:
  - Historical average scenario: key variables set at their respective 10-year average throughout the projection period.
  - Alternative financing conditions scenario: interest rate on new borrowing set 200 basis points higher than in the baseline scenario.
  - Four bound tests: real GDP growth, export growth, inflation (variation in US dollar GDP deflator), or net non-debt flows set one standard deviation below their historical average in the second and third year of the projection period.
  - Combined bound-test: combined shock to the four variables above.
  - Exchange rate shock: one-time 30 percent depreciation of the domestic currency in the first year of the projection period.

#### Risk-rating categories (based on DSA output)
- low risk: all debt burden indicators are well below thresholds in baseline scenarios and do not breach them under any stress tests.
- moderate risk: indicators below thresholds in baseline, but stress tests indicate thresholds could be breached under shocks or abrupt policy changes.
- high risk: baseline and stress tests indicate a protracted breach of debt or debt-service thresholds, but the country does not currently face repayment difficulties.
- in debt distress: the country is already having repayment difficulties.

#### Empirical findings from DSAs (2006, 2008, 2010 vintages)
- Projections span 20 years: 2006 DSA projections 2006–2026; 2008 projections 2008–2028; 2010 projections 2010–2030.
- Between 2006 and 2008, average baseline debt paths improved substantially; in 2010 they deteriorated sharply relative to 2008.
- Long-term projections tended to converge across the three vintages despite short- to medium-term revisions.
- Example: average debt-to-GDP ratio for year 2012:
  - 2006 DSAs: 26.0 percent
  - 2008 DSAs: 21.6 percent
  - 2010 DSAs: 27.5 percent
  - trough-to-peak change: 6.0 percentage points
- For year 2024 debt-to-GDP:
  - 2006: 20.3 percent
  - 2008: 16.9 percent
  - 2010: 20.7 percent
  - trough-to-peak variation: 3.8 percentage points

#### Baseline peaks (peak average values by DSA vintage, in percent)
- Debt/GDP:
  - 2006 peak average value 28.5 year 2006
  - 2008 peak average value 22.6 year 2009
  - 2010 peak average value 27.6 year 2013
  - Most conservative threshold 30
- Debt/Exports:
  - 2006 92.4 year 2009
  - 2008 74.6 year 2009
  - 2010 88.6 year 2013
  - Most conservative threshold 100
- Debt/Revenues:
  - 2006 110.8 year 2009
  - 2008 127.3 year 2011
  - 2010 1200 year (table formatting preserved as in source)
- Debt service/Exports:
  - 2006 6.8 year 2006
  - 2008 5.8 year 2009
  - 2010 6.4 year 2017
  - Most conservative threshold 15
- Debt service/Revenues:
  - 2006 8.0 year 2009
  - 2008 8.4 year 2017
  - Most conservative threshold 25
- Note: These peak average entries are reported as in the source text.

#### Debt, financing needs, and debt-structure changes
- External debt (PV of PPG external debt) and debt service increased in 2008 and 2010 vintages; longer-run increases larger (average increase of 1.2 percentage points for 2013 projections across 2008 and 2010, and 2.1 percentage points on average for 2024 projections).
- Financing needs (gross external financing needs: debt and debt service falling due plus the non-interest current account deficit):
  - 2010 DSAs: debt service represents in aggregate terms between 60 percent and 80 percent of total annual financing needs.
  - Almost all countries had positive financing needs in 2010; for some, the crisis led to sharp upward revisions.
- Composition shifts:
  - Projected aid flows were revised sharply downward after the crisis, more pronounced for non-HIPC than HIPC countries.
  - Average grant element of new disbursements:
    - Earlier vintage: about 32 percent over the short run.
    - 2010 vintage: about 5 percentage points lower than the earlier vintage in the first few years.
    - Concessionality of new disbursements projected to decrease sharply over the DSA horizon.
  - Interest rates on external borrowing (effective):
    - Average projected effective interest rate rose from about 2.4 percent in 2006 DSAs to about 3.0 percent in 2008/2010 DSAs.
    - Projected nominal interest rates remain comfortably below nominal GDP growth for most countries in all vintages.
  - Endogenous debt dynamics:
    - Endogenous debt dynamics are negative throughout the projection period in all three vintages (debt-to-GDP driven down by nominal GDP growth exceeding interest rates).

#### Stress-test sensitivity
- The alternative scenario with 200 basis points higher nominal interest rate often produces the highest debt ratio path for the greatest number of sample countries; effect stronger in 2010 DSAs due to higher base interest rate.
- Exchange-rate shocks (one-time 30 percent depreciation) and the structure of indebtedness leave LICs vulnerable, particularly given foreign-currency denomination of external debt.

#### Macroeconomic projections (denominators) and adjustments
- GDP deflator convergence: all vintage DSAs converge to long-run GDP deflator values of about 2 percent.
- Real GDP growth:
  - 2008/2010 vintages show a slump in 2009 and 2010, then shift significantly higher throughout the remaining projection period.
  - Almost half the sample had upward revisions of real GDP growth projections in 2010 (listed in source).
- Nominal GDP growth projections are slightly higher on average (absolute differences averaging about ½ of one percent per year), compounded over the horizon to boost nominal GDP materially—helping offset higher debt numerators.
- Exports: average exports fall in the short run in 2008 and 2010 DSAs, but at the distant horizon 2010 vintage exports exceed those of 2006 and 2008 vintages.
- Current account balances: aggregate stabilization at slightly higher deficits (-4.1 percent of GDP in 2010 DSAs against -3.7 percent in 2006 DSAs).
- FDI inflows: 2008 and 2010 FDI projections follow similar paths; no strong evidence of a sharp fall-off in aggregate DSA projections.

#### Country-level heterogeneity and key country findings
- Sample: 29 LICs with DSAs available around 2006, 2008, and 2010 (after exclusions for HIPC Completion Point effects).
- Heat-map summaries highlight heterogeneity in projections across countries for variables including nominal GDP, real GDP growth, PV PPG external debt, interest rate, financing needs, current account, FDI, debt service, and grant element.
- Notable country-level observations reported in the source:
  - In 2010, more than half the sample were expected to face debt growth rates exceeding GDP growth over the near term.
  - In several countries the average nominal effective interest rate was revised materially higher since the first DSA (Bolivia, Chad, Lesotho, Mauritania, and Tanzania).
  - Some countries projected to pay debt service in percent of export earnings in excess of 10 percent (Angola, Comoros, Dominica, Ghana, Nepal, Tajikistan, and Tonga).
  - Financing needs positive and increasing in more than half the sample.
  - Grant element of new disbursements falls below 20 percent in the near term in five sample countries (Angola, Bolivia, Chad, Ghana, and Vietnam).

#### Conclusions and policy implications
- Aggregate assessment:
  - LIC debt sustainability improved on the whole prior to the crisis; the crisis had a strong short-run impact on debt and debt-service ratios; long-run ratios on average return toward pre-crisis levels.
  - DSA projections are sensitive to contemporaneous global outlook; rising indebtedness projections have often been offset by more favorable macroeconomic prospects in DSAs.
- Underlying assumptions warranting further study:
  - Assumption 1: significant fiscal and debt management policy adjustments will occur (lowering debt ratio numerators), or a shift toward domestic borrowing.
  - Assumption 2: positive investment-growth dividend from current indebtedness (raising debt ratio denominators); DSAs should carefully assess expected returns on specific projects financed by new borrowing, especially non-concessional financing.
  - Assumption 3: positive long-run growth scenarios based on recent LIC performance and stronger resilience to external shocks.
- Policy implications emphasized:
  - Mobilization and maintenance of concessional financing remain crucial for debt sustainability.
  - IMF and World Bank DSAs should place greater emphasis on the evolution of projected debt paths by comparing successive results through time to inform public financing decisions, policy choices, and the appropriateness of underlying assumptions.
  - With continued LIC DSAs, analysis could be extended and systematized, including comparisons of DSA projections with actual outturns over time.

*Source: _wp12167 — https://www.imf.org/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/wp/2012/_wp12167.pdf*

### 1. Sample Countries ....................................................................................................

### 1. Sample Countries

### Overview of the DSF and DSA
- The Debt Sustainability Framework (DSF) for low-income countries (LICs) was developed jointly by the IMF and the World Bank as a standardized analytical tool to monitor debt sustainability in LICs.
- Objectives of the DSF include guiding LICs’ borrowing decisions and detecting potential crises early to suggest preventive action by country authorities.
- A key element introduced in 2005 is the Debt Sustainability Analysis (DSA), which assesses countries’ risk of debt distress rather than debt sustainability per se.
- To date, well over 300 LIC DSAs have been conducted for 73 countries.
- LIC DSAs are required annually for PRGT-eligible countries and are typically included with Board reviews of IMF programs or in the context of Article IV surveillance discussions.

### Structure and components of DSAs
- Since 2007, each LIC DSA has included two components:
  - An external DSA, where debt dynamics are driven by the non-interest current account balance, net foreign direct investment, and endogenous debt dynamics (including contributions from interest rates, GDP growth, inflation, and exchange rate changes).
  - A public DSA, driven by the primary fiscal balance.

### Historical context and past initiatives
- In the 1970s and 1980s, LICs experienced strong increases in mostly external debt, prompting multilateral debt relief initiatives:
  - The HIPC Initiative launched in 1996, which led to debt relief in 36 out of 39 countries eligible for HIPC assistance.
  - The MDRI complemented HIPC from 2005 by providing full debt relief on eligible debt from the IMF, the International Development Association (World Bank), and the African Development Fund (African Development Bank).
- By the 2000s, many LICs achieved stronger and sustained growth and overall economic performance, responding relatively well to shocks at the end of the decade (commodity price shocks and the global economic crisis).

### Vulnerabilities, recent trends, and policy environment
- Despite improved performance, LICs remain vulnerable to external shocks because of remaining policy weaknesses and narrow export bases.
- Debt ratios deteriorated following the global crisis due to higher financing requirements and a weaker growth outlook.
- Most LIC debt financing has been highly concessional, but many LICs are beginning to take on higher cost, non-concessional debt as they develop.
- Reforms to the IMF’s debt limits policy in 2009 moved to a menu of options based on assessments of LICs’ debt vulnerabilities and capacities.
- Development of domestic debt markets is increasing in some LICs, which can reduce exposure to foreign interest rates and currency risk but often at the cost of much higher domestic interest rates.
- Future aid flows are a concern: IMF (2009a) highlights lower-than-committed aid flows since the crisis, potentially compensated by new official lending from emerging countries, including China, India, and Gulf oil exporters.

### Key assumptions and implications for debt sustainability
- Continued LIC debt sustainability depends critically on post-crisis assumptions:
  - That the shock to external demand is temporary and has no long-term growth impact.
  - That LICs will unwind counter-cyclical policies and continue to have access to adequate financing.
- Projections of decreasing debt ratios over time rely on assumptions about policy responses by LICs throughout the projection period and the implied growth dividend of debt-financed public investment over the long run.

### Purpose and scope of the paper using the sample
- The paper analyzes projections from existing DSAs across three periods around the global economic crisis to examine projected trajectories of debt ratios for a sample of LICs.
- It uses data from earlier external DSAs to analyze the evolution of LICs’ external debt, which still constitutes the bulk of their public debt.
- Section II of the paper discusses motivation and sample data; Section III observes key baseline ratios over three time periods, including evolution of debt and debt service numerators and scaling variables (output, exports, and revenues—denominators); Section IV offers conclusions.

*Source: _wp12167 - 1. Sample Countries .................................................................................................... — https://www.imf.org/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/wp/2012/_wp12167.pdf*

### Box 1. The External Debt Sustainability Analysis (DSA)

### Box 1. The External Debt Sustainability Analysis (DSA)

### Overview
- The external DSA consists of:
  - a forward-looking analysis of a country’s projected external debt and debt service dynamics over the next 20 years (baseline scenario) and its vulnerability to external and policy shocks (alternative scenarios and bound-tests);
  - an assessment of the risk of debt distress, based on indicative debt burden thresholds that depend on the quality of the country’s policies and institutions;
  - recommendations on a borrowing (and lending) strategy that limits the risk of debt distress.
- “External public debt” refers to external (residency criterion) public and publicly guaranteed debt.
- All debt burden indicators are expressed in present value terms to better reflect the high share of concessional financing in LICs debt.

### Key debt-burden indicators and thresholds
- Five key debt burden ratios in the external DSA:
  - debt-to-GDP
  - debt-to-exports
  - debt-to-revenues
  - debt service-to-exports
  - debt service-to-revenues
- CPIA scores (averages of 16 indicators) classify countries into weak/medium/strong performers; a three-year moving average CPIA score is used.
- Debt Burden Thresholds under the DSF (NPV of debt in percent of Exports / GDP / Revenue; Debt service in percent of Exports / Revenue):
  - Weak Policy: 100 / 30 / 200 ; 15 / 25
  - Medium Policy: 150 / 40 / 250 ; 20 / 30
  - Strong Policy: 200 / 50 / 300 ; 25 / 35
- Note: Debt-service-to-revenue thresholds were revised lower in February 2010 to 18, 20, and 22 percent for weak, medium, and strong policy performers, respectively.

### Scenarios and stress tests used
- Baseline: 20-year forward projection.
- Alternative scenarios and bound tests run in addition to baseline:
  - Historical average scenario: key variables set at their respective 10-year average throughout the projection period.
  - Alternative financing conditions scenario: interest rate on new borrowing set 200 basis points higher than in the baseline scenario.
  - Four bound tests: real GDP growth, export growth, inflation (variation in US dollar GDP deflator), or net non-debt flows set one standard deviation below their historical average in the second and third year of the projection period.
  - Combined bound-test: combined shock to the four variables above.
  - Exchange rate shock: one-time 30 percent depreciation of the domestic currency in the first year of the projection period.

### Risk-rating categories (based on DSA output)
- low risk: all debt burden indicators are well below thresholds in baseline scenarios and do not breach them under any stress tests.
- moderate risk: indicators below thresholds in baseline, but stress tests indicate thresholds could be breached under shocks or abrupt policy changes.
- high risk: baseline and stress tests indicate a protracted breach of debt or debt-service thresholds, but the country does not currently face repayment difficulties.
- in debt distress: the country is already having repayment difficulties.

### Empirical findings from DSAs (2006, 2008, 2010 vintages)
- Aggregate patterns:
  - Projections span 20 years: 2006 DSA projections 2006–2026; 2008 projections 2008–2028; 2010 projections 2010–2030.
  - Between 2006 and 2008, average baseline debt paths improved substantially; in 2010 they deteriorated sharply relative to 2008.
  - Long-term projections tended to converge across the three vintages despite short- to medium-term revisions.
- Specific illustrative figures and comparisons:
  - Example: average debt-to-GDP ratio for year 2012:
    - 2006 DSAs: 26.0 percent
    - 2008 DSAs: 21.6 percent
    - 2010 DSAs: 27.5 percent
    - trough-to-peak change: 6.0 percentage points
  - For year 2024 debt-to-GDP:
    - 2006: 20.3 percent
    - 2008: 16.9 percent
    - 2010: 20.7 percent
    - trough-to-peak variation: 3.8 percentage points
- Baseline peaks (Table 2 style summary, peak average values by DSA vintage, in percent):
  - Debt/GDP: 2006 peak average value 28.5 year 2006; 2008 peak average value 22.6 year 2009; 2010 peak average value 27.6 year 2013; Most conservative threshold 30
  - Debt/Exports: 2006 92.4 year 2009; 2008 74.6 year 2009; 2010 88.6 year 2013; Most conservative threshold 100
  - Debt/Revenues: 2006 110.8 year 2009; 2008 127.3 year 2011; 2010 1200 year (table formatting preserved as in source)
  - Debt service/Exports: 2006 6.8 year 2006; 2008 5.8 year 2009; 2010 6.4 year 2017; Most conservative threshold 15
  - Debt service/Revenues: 2006 8.0 year 2009; 2008 8.4 year 2017; Most conservative threshold 25
  - Note: These peak average entries are reported as in the source text.

### Debt, financing needs, and debt-structure changes
- External debt (PV of PPG external debt) and debt service increased in 2008 and 2010 vintages; longer-run increases larger (average increase of 1.2 percentage points for 2013 projections across 2008 and 2010, and 2.1 percentage points on average for 2024 projections).
- Financing needs (gross external financing needs: debt and debt service falling due plus the non-interest current account deficit):
  - 2010 DSAs: debt service represents in aggregate terms between 60 percent and 80 percent of total annual financing needs.
  - Almost all countries had positive financing needs in 2010; for some, the crisis led to sharp upward revisions.
- Composition shifts:
  - Projected aid flows were revised sharply downward after the crisis, more pronounced for non-HIPC than HIPC countries.
  - Average grant element of new disbursements:
    - Earlier vintage: about 32 percent over the short run.
    - 2010 vintage: about 5 percentage points lower than the earlier vintage in the first few years.
    - Concessionality of new disbursements projected to decrease sharply over the DSA horizon.
  - Interest rates on external borrowing (effective):
    - Average projected effective interest rate rose from about 2.4 percent in 2006 DSAs to about 3.0 percent in 2008/2010 DSAs.
    - Projected nominal interest rates remain comfortably below nominal GDP growth for most countries in all vintages.
  - Endogenous debt dynamics:
    - Endogenous debt dynamics are negative throughout the projection period in all three vintages (debt-to-GDP driven down by nominal GDP growth exceeding interest rates).

### Stress-test sensitivity
- The alternative scenario with 200 basis points higher nominal interest rate often produces the highest debt ratio path for the greatest number of sample countries; effect stronger in 2010 DSAs due to higher base interest rate.
- Exchange-rate shocks (one-time 30 percent depreciation) and the structure of indebtedness leave LICs vulnerable, particularly given foreign-currency denomination of external debt.

### Macroeconomic projections (denominators) and their adjustments
- GDP deflator convergence: all vintage DSAs converge to long-run GDP deflator values of about 2 percent.
- Real GDP growth:
  - 2008/2010 vintages show a slump in 2009 and 2010, then shift significantly higher throughout the remaining projection period.
  - Almost half the sample had upward revisions of real GDP growth projections in 2010 (listed in source).
- Nominal GDP growth projections are slightly higher on average (absolute differences averaging about ½ of one percent per year), compounded over the horizon to boost nominal GDP materially—helping offset higher debt numerators.
- Exports: average exports fall in the short run in 2008 and 2010 DSAs, but at the distant horizon 2010 vintage exports exceed those of 2006 and 2008 vintages.
- Current account balances: aggregate stabilization at slightly higher deficits (-4.1 percent of GDP in 2010 DSAs against -3.7 percent in 2006 DSAs).
- FDI inflows: 2008 and 2010 FDI projections follow similar paths; no strong evidence of a sharp fall-off in aggregate DSA projections.

### Country-level heterogeneity and key country findings
- Sample: 29 LICs with DSAs available around 2006, 2008, and 2010 (after exclusions for HIPC Completion Point effects).
- Heat-map summaries (Tables 3a and 3b) highlight heterogeneity in projections across countries for variables including nominal GDP, real GDP growth, PV PPG external debt, interest rate, financing needs, current account, FDI, debt service, and grant element.
- Notable country-level observations (as reported in the source):
  - In 2010, more than half the sample were expected to face debt growth rates exceeding GDP growth over the near term (list of countries in source).
  - In several countries the average nominal effective interest rate was revised materially higher since the first DSA (Bolivia, Chad, Lesotho, Mauritania, and Tanzania).
  - Some countries projected to pay debt service in percent of export earnings in excess of 10 percent (Angola, Comoros, Dominica, Ghana, Nepal, Tajikistan, and Tonga).
  - Financing needs positive and increasing in more than half the sample (list provided in source).
  - Grant element of new disbursements falls below 20 percent in the near term in five sample countries (Angola, Bolivia, Chad, Ghana, and Vietnam).

### Conclusions and policy implications (as presented)
- Aggregate assessment:
  - LIC debt sustainability improved on the whole prior to the crisis; the crisis had a strong short-run impact on debt and debt-service ratios; long-run ratios on average return toward pre-crisis levels.
  - DSA projections are sensitive to contemporaneous global outlook; rising indebtedness projections have often been offset by more favorable macroeconomic prospects in DSAs.
- Potential underlying assumptions warranting further study:
  - Assumption 1: significant fiscal and debt management policy adjustments will occur (lowering debt ratio numerators), or a shift toward domestic borrowing.
  - Assumption 2: positive investment-growth dividend from current indebtedness (raising debt ratio denominators); DSAs should carefully assess expected returns on specific projects financed by new borrowing, especially non-concessional financing.
  - Assumption 3: positive long-run growth scenarios based on recent LIC performance and stronger resilience to external shocks.
- Policy implications emphasized:
  - Mobilization and maintenance of concessional financing remain crucial for debt sustainability.
  - IMF and World Bank DSAs should place greater emphasis on the evolution of projected debt paths by comparing successive results through time to inform public financing decisions, policy choices, and the appropriateness of underlying assumptions.
  - With continued LIC DSAs, analysis could be extended and systematized, including comparisons of DSA projections with actual outturns over time.

*Source: Box 1. The External Debt Sustainability Analysis (DSA), _wp12167.*

### References

### _wp12167 - References

### IMF and IMF/World Bank publications
- IMF (2009a): “The Implications of the Global Financial Crisis for Low-Income Countries – An Update”, September 2009
- IMF (2009b): “The Debt Sustainability Framework for Low-Income Countries,” IMF Occasional Paper 266, February 2009
- IMF (2009c): “Debt Limits in Fund-Supported Programs: Proposed New Guidelines”, August 2009
- IMF (2009d): “Staff Guidance Note on Debt Limits in Fund-Supported Programs”, December 2009
- IMF (2009e): “A New Architecture of Facilities for Low-Income Countries”, June 2009
- IMF (2009f): “Modification of Access Policies for the Poverty Reduction and Growth Facility and the Exogenous Shocks Facility”, April 2009
- IMF (2010): “Preserving Debt Sustainability in Low-Income Countries in the Wake of the Global Crisis”, April 2010
- IMF/World Bank (2004a): “Debt Sustainability in Low-Income Countries: Further Considerations on an Operational Framework and Policy Implications,” September 2004
- IMF/World Bank (2004b): “Debt Sustainability in Low-Income Countries—Proposal for an Operational Framework and Policy Implications,” February 2004
- IMF/World Bank (2005): “Operational
 Framework for Debt Sustainability Assessments in Low-Income Countries—Further Considerations,” March 2005
- IMF/World Bank (2008): “Staff Guidance Note on the Application of the Joint Fund-Bank Debt Sustainability Framework for Low-Income Countries,” October 2008
- IMF/World Bank (2010): “Staff Guidance Note on the Application of the Joint Bank-Fund Debt Sustainability Framework for Low-Income Countries,” January 2010
- IMF/World Bank (2012) “Revisiting the Debt Sustainability Framework for Low-Income Countries”, January 2012
- World Bank (2006): “How to do a Debt Sustainability Analysis for Low-Income Countries,” October 2006

### IMF working papers and related research
- Berg, A. et al (2011): “Global Shocks and their Impact on Low-Income Countries: Lessons from the Global Financial Crisis”, IMF Working Paper 11/27, February 2011
- Brooks, R. and al (1998): “External Debt Histories of Ten Low-Income Developing Countries: Lessons from Their Experience”, IMF Working Paper 98/72, May 1998
- Sun, Y. (2004): “External Debt Sustainability in HIPC Completion Point Countries”, IMF Working paper 04/160, September 2004
- Yang, J. and Nyberg, D. (2009): “External Debt Sustainability in HIPC Completion Point Countries: An Update”, IMF Working Paper 09/128, June 2009

### Academic articles, working papers, and other studies
- Arnone, M. and A. Presbitero (2006): “External Debt Sustainability and Domestic Debt in Heavily Indebted Poor Countries”, Rivista Internazionale di Scienze Sociali, No. 2, 2007
- Hernandez, L. and B. Gamarra (2011): “Debt Sustainability and Debt Distress in the Wake of the Ongoing Financial Crisis: the Case of IDA-only African Countries”, in Sovereign Debt and the Financial Crisis, Chapter 6, edited by Carlos A. Primo Braga and Gallina A. Vinceletti, World Bank
- Leo, B. (2009): “Will World Bank and IMF Lending Lead to HIPC IV? Déjà-Vu All Over Again”, Working Paper n°193, Center for Global Development
- Nwachukwu, J. (2008): “The Prospects for Foreign Debt Sustainability in Post Completion Point Countries: Implications of the HIPC-MDRI Framework”, Development Policy Review, 2008, 26 (2): 171-188.
- Presbitero, A. F. (2009): “The 2008-2009 Financial Crisis and the HIPCs: Another Debt Crisis?” MoFiR Working Paper 29, September 2009
- Wyplosz, C. (2007): “Debt Sustainability Assessment: The IMF Approach and Alternatives”, HEI Working Paper n° 03/2007

*Source: _wp12167 - References*

### Appendix Figures

### _wp12167 - Appendix Figures

### Debt Ratios (Levels)
- Figure A1. PV of Debt-to-GDP Ratio, 2006–29 (In percent)
  - Sources: Country authorities; and staff estimates and projections.
  - Countries shown include: Angola; Bangladesh; Bolivia; Burkina Faso; Cameroon; Chad; Comoros; Djibouti; Georgia; Ghana; Guyana; Honduras; Lao PDR; Lesotho; Mauritania; Moldova; Nepal; Papua New Guinea; Solomon Islands; Tajikistan; Tanzania; Tonga; Vietnam; Cambodia; Dominica; Kyrgyz Republic; Mozambique; Yemen.
- Figure A2. PV of Debt-to-Exports Ratio, 2006–29 (In percent)
  - Sources: Country authorities; and staff estimates and projections.
  - Countries shown (same set as Figure A1).
- Figure A3. PV of Debt-to-Revenue Ratio, 2006–29 (In percent)
  - Sources: Country authorities; and staff estimates and projections.
  - Countries shown (same set as Figure A1).
- Figure A6. PV of PPG External Debt, 2006–29 (In billions of US$)
  - Sources: Country authorities; and staff estimates and projections.
  - Countries shown (same set as Figure A1).

### Debt-Service Indicators
- Figure A4. Debt Service-to-Exports Ratio, 2006–29 (In percent)
  - Sources: Country authorities; and staff estimates and projections.
  - Countries shown (same set as Figure A1).
- Figure A5. Debt Service-to-Revenue Ratio, 2006–29 (In percent)
  - Sources: Country authorities; and staff estimates and projections.
  - Countries shown (same set as Figure A1).
- Figure A7. Debt Service, 2006–29 (In billions of US$)
  - Sources: Country authorities; and staff estimates and projections.
  - Countries shown (same set as Figure A1).

### Nominal Macroeconomic Aggregates
- Figure A8. Nominal GDP, 2006–29 (In billions of US$)
  - Sources: Country authorities; and staff estimates and projections.
  - Countries shown (same set as Figure A1).
- Figure A9. Exports of Goods and Services, 2006–29 (In billions of US$)
  - Sources: Country authorities; and staff estimates and projections.
  - Countries shown (same set as Figure A1).
- Figure A10. Government Revenue, 2006–29 (In billions of US$)
  - Sources: Country authorities; and staff estimates and projections.
  - Countries shown (same set as Figure A1).

### Financing Flows and Needs
- Figure A11. Financing Needs, 2006–29 (In billions of US$)
  - Sources: Country authorities; and staff estimates and projections.
  - Countries shown (same set as Figure A1).
- Figure A12. New Medium and Long Term Disbursements, 2006–29 (In billions of US$)
  - Sources: Country authorities; and staff estimates and projections.
  - Countries shown (same set as Figure A1).
- Figure A15. Aid flow, 2006–29 (In billions of US$)
  - Sources: Country authorities; and staff estimates and projections.
  - Countries shown (same set as Figure A1).
- Figure A16. Grant Element in New Disbursements, 2006–29 (In percent)
  - Sources: Country authorities; and staff estimates and projections.
  - Countries shown (same set as Figure A1).

### Debt Dynamics and Accumulation
- Figure A13. Debt Accumulation Rate, 2006–29 (In percent)
  - Sources: Country authorities; and staff estimates and projections.
  - Countries shown (same set as Figure A1).
- Figure A14. Nominal Debt and Nominal GDP Growth, 2010–29 (In percent, 2010 DSAs)
  - Sources: Country authorities; and staff estimates and projections.1
  - Note: Excludes countries, for which 2010 DSAs were not published.1
- Figure A17. Nominal Effective Interest Rate, 2006–29 (In percent)
  - Sources: Country authorities; and staff estimates and projections.
- Figure A18. Nominal GDP Growth and Nominal Effective Interest Rate, 2010–29 (In percent, 2010 DSAs)
  - Sources: Country authorities; and staff estimates and projections.1
  - Note: Excludes countries, for which 2010 DSAs were not published.1

### Real Activity and Capital Flows
- Figure A19. Real GDP Growth, 2006–29 (In percent)
  - Sources: Country authorities; and staff estimates and projections.
- Figure A20. Foreign Direct Investment (FDI), 2006–29 (In billions of US$)
  - Sources: Country authorities; and staff estimates and projections.

### Baseline vs. Historical Alternative Scenarios
- Figure A21. PV of Debt-to-GDP Ratio under Historical Alternative Scenario, 2006–29 (In percent)
  - Sources: Country authorities; and staff estimates and projections.
- Figure A22. PV of Debt-to-GDP Ratio: Baseline vs. Historical Alternative Scenario, 2010–29 (In percent, 2010 DSA)
  - Sources: Country authorities; and staff estimates and projections.1
  - Note: Excludes countries, for which 2010 DSAs were not published.1

### Figure Notes and Common Elements
- Time coverage across figures: 2006–29 (many series explicitly plotted at 2010, 2015, 2020, 2025, 2030).
- Repeated caption line: "Sources: Country authorities; and staff estimates and projections."
- Several figures present scales and tick values as shown (examples preserved exactly in figure labels across the appendix).

*Appendix Figures, _wp12167 (sources as shown in figures).*

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_Source: https://www.imf.org/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/wp/2012/_wp12167.pdf_