## Factsheet: IMF-World Bank Debt Sustainability Framework for Low-Income Countries

## Source details

**Canonical URL:** [Factsheet: IMF-World Bank Debt Sustainability Framework for Low-Income Countries](https://www.imf.org/en/about/factsheets/sheets/2023/imf-world-bank-debt-sustainability-framework-for-low-income-countries)

## Other formats

- [Markdown version](/en/about/factsheets/sheets/2023/imf-world-bank-debt-sustainability-framework-for-low-income-countries/index.md)
- [Structured JSON version](/en/about/factsheets/sheets/2023/imf-world-bank-debt-sustainability-framework-for-low-income-countries/index.json)
- [Bundle manifest](/en/about/factsheets/sheets/2023/imf-world-bank-debt-sustainability-framework-for-low-income-countries/bundle-manifest.json)

## Bibliographic details
- Published: January 8, 2023

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### Purpose and role of the LIC-DSF
- 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:
  - Support IMF and World Bank policy advice and lending decisions.
  - Guide fiscal policies and public debt management in LICs, balancing financing for growth and development with debt vulnerability control.
  - 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.
- Use by stakeholders:
  - Official creditors, other multilateral development banks, and donors use the framework to guide lending and grant-allocation to LICs.
  - 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.
  - 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.

### Key features and methodology
- Time horizon and projections:
  - 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.
- Analytical inputs:
  - Analysis is informed by a macro framework with baseline projections of key macroeconomic variables and financing assumptions used to forecast debt dynamics.
  - Realism tools ensure credibility and internal consistency of the baseline scenario.
  - Stress tests gauge sensitivity of forecasts to changes in macroeconomic assumptions.
- Debt-carrying capacity and classification:
  - Capacity to carry debt depends on the strength of policies and institutions, and the dynamism and resilience of economies.
  - Countries are classified by Debt Carrying Capacity into three groups: Weak, Medium, and Strong, based on a Composite Indicator.
- Debt-burden indicators and thresholds:
  - 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.
  - 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.
  - Countries with stronger debt-carrying capacity are assigned higher thresholds.
- Risk signalling and final ratings:
  - 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.
  - 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.

### Recent updates and rollout
- 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:
  - Preparation of the new Guidance Note and Template.
  - Training of staff.
  - Outreach to country authorities and other stakeholders.
- Interim practice:
  - 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.

### Communications and outreach
- 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.

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## Content in this bundle

- [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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## References

- [September 2026](https://www.imf.org/en/topics/2026-review-of-low-income-countries-debt-sustainability-framework)
- [changes to it periodically](https://www.imf.org/en/News/Articles/2017/10/02/pr17380-imf-executive-board-reviews-the-joint-imf-world-bank-debt-sustainability-framework-for-lics)

_Source: https://www.imf.org/en/about/factsheets/sheets/2023/imf-world-bank-debt-sustainability-framework-for-low-income-countries_