{
  "title": "Factsheet: IMF-World Bank Debt Sustainability Framework for Low-Income Countries",
  "sourceUrl": "https://www.imf.org/en/about/factsheets/sheets/2023/imf-world-bank-debt-sustainability-framework-for-low-income-countries",
  "canonical": "https://www.imf.org/en/about/factsheets/sheets/2023/imf-world-bank-debt-sustainability-framework-for-low-income-countries",
  "overlayPath": "/en/about/factsheets/sheets/2023/imf-world-bank-debt-sustainability-framework-for-low-income-countries/index.md",
  "summary": "Low-income countries (LICs) have often struggled with large external debts. The IMF and the World Bank introduced the Debt Sustainability Framework for such countries in April 2005 and have made changes to it periodically. This video explains what debt sustainability is and why it is important.",
  "publishDate": "2023-01-08",
  "sections": [
    {
      "heading": "Purpose and role of the LIC-DSF",
      "content": "- The Debt Sustainability Framework for Low-Income Countries (LIC-DSF) is developed jointly by the IMF and the World Bank to analyze public debt stress and sustainability in countries eligible for concessional financing from either institution.\n- Since April 2005, the LIC-DSF has been the cornerstone of the international community’s assessment of risks to debt sustainability in LICs, with important operational implications for stakeholders.\n- Primary objectives:\n  - Support IMF and World Bank policy advice and lending decisions.\n  - Guide fiscal policies and public debt management in LICs, balancing financing for growth and development with debt vulnerability control.\n  - Provide early warning signals on the buildup of risks of public debt stress and unsustainability to help borrowers and creditors take appropriate action and avoid debt distress and restructurings.\n- Use by stakeholders:\n  - Official creditors, other multilateral development banks, and donors use the framework to guide lending and grant-allocation to LICs.\n  - The LIC-DSF is used to determine the size of the restructuring envelope required to restore public debt sustainability in cases of sovereign debt restructurings.\n  - Low-income countries are encouraged to use the DSF or a similar framework; creditors are encouraged to incorporate debt sustainability assessments into their lending decisions."
    },
    {
      "heading": "Key features and methodology",
      "content": "- Time horizon and projections:\n  - Requires regular debt sustainability analyses of a country’s projected debt burden over the next 10 years and its vulnerability to economic and policy shocks.\n- Analytical inputs:\n  - Analysis is informed by a macro framework with baseline projections of key macroeconomic variables and financing assumptions used to forecast debt dynamics.\n  - Realism tools ensure credibility and internal consistency of the baseline scenario.\n  - Stress tests gauge sensitivity of forecasts to changes in macroeconomic assumptions.\n- Debt-carrying capacity and classification:\n  - Capacity to carry debt depends on the strength of policies and institutions, and the dynamism and resilience of economies.\n  - Countries are classified by Debt Carrying Capacity into three groups: Weak, Medium, and Strong, based on a Composite Indicator.\n- Debt-burden indicators and thresholds:\n  - Analysis relies on debt-burden indicators comparing stock of debt and debt service to measures of repayment capacity such as GDP, exports, or fiscal revenue.\n  - Forecasts of debt-burden indicators in baseline and shock scenarios are compared to DCC-specific thresholds derived from estimated early-warning models of past crises.\n  - Countries with stronger debt-carrying capacity are assigned higher thresholds.\n- Risk signalling and final ratings:\n  - A mechanical risk signal is generated when a debt-burden indicator breaches its threshold in the baseline or shock scenarios for more than one year at any time in the first 10 years of projections.\n  - Final risk ratings combine information from mechanical risk signals and structured application of judgment to reflect country-specific factors; sustainability assessments are at present only judgment based."
    },
    {
      "heading": "Recent updates and rollout",
      "content": "- The LIC-DSF has been updated periodically, most recently in September 2026.\n- Outcome from the 2026 LIC-DSF Review is noted; the full roll-out of the revised LIC-DSF will occur in the summer of 2027, following:\n  - Preparation of the new Guidance Note and Template.\n  - Training of staff.\n  - Outreach to country authorities and other stakeholders.\n- Interim practice:\n  - Debt sustainability analyses (DSAs) are being prepared under the current LIC-DSF framework while taking into account implications of the transition to the revised LIC-DSF framework."
    },
    {
      "heading": "Communications and outreach",
      "content": "- A video explains what debt sustainability is and why it is important.\n- An interactive guide on Debt Sustainability Framework for low-income countries is available for download."
    }
  ],
  "bullets": [
    "The Debt Sustainability Framework for Low-Income Countries (LIC-DSF) is developed jointly by the IMF and the World Bank to analyze public debt stress and sustainability in countries eligible for concessional financing from either institution.",
    "Since April 2005, the LIC-DSF has been the cornerstone of the international community’s assessment of risks to debt sustainability in LICs, with important operational implications for stakeholders.",
    "Primary objectives:",
    "Use by stakeholders:",
    "Time horizon and projections:",
    "Analytical inputs:",
    "Debt-carrying capacity and classification:",
    "Debt-burden indicators and thresholds:",
    "Risk signalling and final ratings:",
    "The LIC-DSF has been updated periodically, most recently in September 2026.",
    "Outcome from the 2026 LIC-DSF Review is noted; the full roll-out of the revised LIC-DSF will occur in the summer of 2027, following:",
    "Interim practice:",
    "A video explains what debt sustainability is and why it is important.",
    "An interactive guide on Debt Sustainability Framework for low-income countries is available for download.",
    "[lending decisions (PDF)](/external/np/g20/pdf/2019/111519.pdf){rel=\"external\" type=\"application/pdf\"}",
    "[This chart shows the risk ratings for low-income countries. (PDF)](/external/pubs/ft/dsa/dsalist.pdf){rel=\"external\" type=\"application/pdf\"}"
  ],
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    {
      "title": "lending decisions",
      "role": "document",
      "sourceUrl": "https://www.imf.org/external/np/g20/pdf/2019/111519.pdf",
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    {
      "title": "This chart shows the risk ratings for low-income countries.",
      "role": "document",
      "sourceUrl": "https://www.imf.org/external/Pubs/ft/dsa/DSAlist.pdf",
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        "path": "/external/pubs/ft/dsa/dsalist.pdf",
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  "generatedAtUtc": "2026-09-29T13:58:23.439Z"
}