## Review of the Debt Sustainability Framework for Low Income Countries: Proposed Reforms

## Source details

**Canonical URL:** [Review of the Debt Sustainability Framework for Low Income Countries: Proposed Reforms](https://www.imf.org/en/publications/policy-papers/issues/2017/10/02/pp082217lic-dsf)

## Other formats

- [Markdown version](/en/publications/policy-papers/issues/2017/10/02/pp082217lic-dsf/index.md)
- [Structured JSON version](/en/publications/policy-papers/issues/2017/10/02/pp082217lic-dsf/index.json)
- [Bundle manifest](/en/publications/policy-papers/issues/2017/10/02/pp082217lic-dsf/bundle-manifest.json)

## Bibliographic details
- Published: October 2, 2017

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### Overview of the LIC DSF
- The Debt Sustainability Framework for Low-income Countries (LIC DSF) is described as the cornerstone of assessments of risks to debt sustainability in LICs.
- Core functions of the framework:
  - Classifies countries based on their assessed debt-carrying capacity.
  - Estimates threshold levels for selected debt burden indicators.
  - Evaluates baseline projections and stress test scenarios relative to these thresholds.
  - Combines indicative rules and staff judgment to assign risk ratings of external debt distress.

### Findings and identified shortcomings
- The framework has demonstrated operational value since the last review in 2012.
- Areas for improvement identified through staff analysis and stakeholder feedback:
  - Gaps in the framework given the evolving nature of risks facing LICs.
  - Complexity of the framework.
  - Lack of transparency in aspects of the framework.
- Objective concern: ensure the framework provides early warnings of potential debt distress without unnecessarily constraining borrowing for development.

### Proposed reform principles
- Two over-arching principles guiding the proposed reforms:
  - The core architecture of the DSF—model-based results complemented by judgment—remains appropriate.
  - Reforms should maintain an appropriate balance by providing early warnings of potential debt distress without unnecessarily constraining borrowing for development.

### Purpose and scope of the paper
- The paper proposes a set of reforms to enhance the value of the LIC DSF for all users.
- Emphasis on enhancing performance in assessing risks, improving transparency, and addressing identified gaps.

*International Monetary Fund — Review of the Debt Sustainability Framework for Low Income Countries: Proposed Reforms, October 2, 2017*

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## Content in this bundle

- **Policy Paper**
  - [Policy Paper (Markdown version)](/-/media/files/publications/pp/2017/pp082217lic-dsf.pdf.md){rel="alternate" type="text/markdown"}
  - [Policy Paper (PDF)](/-/media/files/publications/pp/2017/pp082217lic-dsf.pdf){rel="external" type="application/pdf"}

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_Source: https://www.imf.org/en/publications/policy-papers/issues/2017/10/02/pp082217lic-dsf_