Guidance Note On Implementing The Debt Limits Policy In Fund Supported Programs

Policy Papers, May 25, 2021

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Canonical URL: Guidance Note On Implementing The Debt Limits Policy In Fund Supported Programs

The Debt Limits Policy (DLP) establishes the framework for using quantitative conditionality to address debt vulnerabilities in IMF-supported programs.
In October 2020, the Executive Board approved reforms to the DLP which will enter into effect on June 30, 2021.
The note provides operational and technical guidance related to the implementation of the DLP, including the operationalization of the approved reforms.
The Guidance Note is intended for use by both IMF staff and country officials.

Maintain the risk-based approach to setting debt conditionality informed by Debt Sustainability Analyses as under the previous DLP approved in 2014.
Provide countries with more financing flexibility in practice while still adequately containing debt vulnerabilities through appropriate safeguards.
Account for country-specific circumstances in the design of debt limits.

The note describes the process in three main steps:
- (i) identifying debt vulnerabilities to inform the focus of debt conditionality;
- (ii) designing debt conditionality;
- (iii) implementing debt conditionality through the review cycle.

The Guidance Note includes operational and technical guidance for operationalizing the DLP reforms.
Several annexes cover definitional, technical, and operational issues arising in the determination and implementation of public debt limits.