IMF Executive Board Reviews the Joint IMF-World Bank Debt Sustainability Framework for Low Income Countries

IMF News, September 22, 2026

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IMF Executive Board Reviews the Joint IMF-World Bank Debt Sustainability Framework for Low Income Countries

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Bibliographic details

• Published: September 22, 2026

Overview

• On September 9, 2026, the Executive Board of the International Monetary Fund (IMF) reviewed the joint IMF-World Bank Debt Sustainability Framework for Low-Income Countries (LIC-DSF).
• Since the last review in 2017, the debt environment for LICs has become more complex and riskier, with rising debt levels and more diverse financing sources, including an increasing role for domestic and external borrowing on commercial terms.
• The review finds the LIC-DSF has continued to perform well—successfully identifying debt distress episodes ahead of time—and remains “fit-for-purpose”, while identifying areas for further improvement and “future proofing”.

Key findings from the review

• The LIC-DSF has been the cornerstone of the international community’s assessment of risks to debt sustainability in LICs since 2005, with prior reviews in 2006, 2009, 2012, and 2017.
• The framework successfully identifies debt distress episodes ahead of time and helps country authorities and partners make informed borrowing and lending decisions.
• Areas for improvement were identified to adapt the framework to evolving LIC circumstances, including upgrades in measurement, scope, and tools.

Proposed upgrades (three key areas)

• Greater rigor in analysis of debt sustainability risks:
  • Better differentiate between countries facing some risk of debt stress and countries whose debts are assessed as unsustainable.
  • Refine the measurement of countries’ debt-carrying capacity.
  • Recalibrate and expand the scope of thresholds that signal debt stress.
  • Introduce new tools to assess debt sustainability.
• Broaden the lens on debt risks:
  • More systematically analyze domestic debt vulnerabilities.
  • Better reflect long-term challenges, including those stemming from climate adaptation and developmental needs.
  • Allow countries to better assess available fiscal space for investment in development and climate adaptation while containing long-term debt vulnerabilities.
• Enhance objectivity of assessments:
  • Further develop realism tools and stress tests to support consistency and accuracy of forecasts.
  • Refine and streamline criteria for debt coverage.
  • Incentivize improvements in quality, breadth, transparency, and reliability of public debt data used in DSAs.

Executive Board assessment and Directors’ views

• Directors welcomed the comprehensive review and extensive consultations with the Executive Board and other stakeholders.
• Key themes from Directors:
  • Reaffirmed the LIC-DSF’s key role in analysis of public debt stress and sustainability to support Fund policy advice, lending decisions, and fiscal/public debt management in LICs.
  • Agreed proposed reforms would help ensure the LIC-DSF remains fit for purpose amid heightened debt vulnerabilities and greater heterogeneity across LICs.
  • Noted increased complexity of the proposed framework and underscored importance of a clear Guidance Note (GN), careful communication, targeted capacity development, and continued stakeholder engagement for smooth adoption.
• Terminology and publication:
  • Agreed to refine LIC-DSF terminology to better differentiate debt stress from unsustainable debt.
  • Agreed that, for documents prepared under the new framework, references to “debt distress” in IMF policies will be understood as referring to “debt stress”, except when used in the phrase “in debt distress”.
  • Agreed to keep the harmonized discount rate unchanged at five percent for use in the IMF Debt Limits Policy and the LIC-DSF.
• New model and publication stance:
  • Welcomed the new model of debt sustainability and associated mechanical risk signal, and complementary auxiliary debt sustainability indicators.
  • Some Directors stressed preserving the central role of external debt burden indicators, especially in restructuring cases.
  • While a few Directors advocated full publication of model results, most Directors agreed to temporarily restrict publication of the probability cut‑offs used to generate the mechanical risk signal of unsustainable public debt and the mechanical risk signals in individual DSAs, to allow time to gain experience with the new methodology and its communication.
  • Endorsed adding the stand‑alone staff note used to share information with the Board on the mechanical signal and how auxiliary indicators inform the final assessment to the “negative list” under the Fund’s Transparency Policy.
  • Encouraged staff to clarify criteria and timeline for revisiting the proposed non‑publication regime as experience with the new model progresses, with some Directors suggesting this should be done alongside the next MAC‑SRDSF review.
• New modules and diagnostics:
  • Welcomed the introduction of the new domestic debt risk and long‑term modules to improve structured application of judgment in final stress and sustainability assessments.
  • Underscored importance of enhanced diagnostics on domestic debt given its increased importance in many LICs.
  • Endorsed the long‑term module as a complementary tool to assess implications of policy and investment decisions—including climate adaptation—on public debt stress and sustainability.
  • Highlighted the role of new modules and enhanced granularity of risk ratings in better capturing heterogeneity across LICs.
• Data coverage, realism tools, and judgment:
  • Highlighted importance of comprehensive coverage of debt, including for SOEs, for a credible LIC‑DSF.
  • Endorsed enhancements to realism tools and stress tests and introduction of a confidence flag on debt data and baseline adjustments to mitigate risk from debt data gaps and incentivize comprehensiveness, transparency, and reliability.
  • Noted efforts should not unduly penalize countries making good‑faith efforts to improve debt data coverage.
  • Reaffirmed structured and transparent use of judgment in final assessments and requested staff clarify in the new GN how judgment will be exercised and other implementation issues.
• Transition and implementation:
  • Supported proposed transitional modalities and agreed a transition period is needed to publish the new GN and DSA template and to train country teams and authorities.
  • Noted the new framework is expected to be implemented for country documents issued for Board consideration after the 2027 Board summer recess.
  • Emphasized importance of clear communication on implications of changes to a country’s debt‑carrying capacity and monitoring implications from refinements such as the new output volatility indicator during transition.
  • Requested staff continue to monitor and keep the Board informed on implementation.

Operational timeline and procedural points

• The concurrent review of the harmonized discount rate concluded; the discount rate remains unchanged at five percent.
• The revised framework is expected to become operational in the second half of 2027, allowing time to complete operational guidance for staff and training of country teams and authorities.
• Transitional modalities: transition period to allow publication of GN and DSA template and training; implementation for country documents after the 2027 Board summer recess.

Key statistics and exact dates (verbatim)

• September 9, 2026
• September 21, 2026
• 2017 (last review)
• 2005 (framework introduction)
• prior reviews in 2006, 2009, 2012, and 2017
• five percent (harmonized discount rate)
• second half of 2027
• 2027 Board summer recess

Source: IMF Communications Department press release, “IMF Executive Board Reviews the Joint IMF-World Bank Debt Sustainability Framework for Low Income Countries”, September 21, 2026.

References

• PRESS CENTER
• http://www.IMF.org/external/np/sec/misc/qualifiers.htm
• https://www.imf.org/en/home