Debt Vulnerabilities in Low-Income Countries Recent Developments and Trends

Policy Papers, October 31, 2025

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Purpose: Provide factual data and insights on recent trends in public debt vulnerabilities and financing challenges in Low-Income Countries (LICs), with a special focus on domestic debt issues.
Context: Despite efforts to unwind the impact of the COVID-19 fiscal stimulus and other shocks, debt levels in many LICs remain relatively high, and vulnerabilities are exacerbated by uncertain global conditions and a changing creditor landscape.
Emphasis: Evidence highlights the ever more important role of domestic debt as a source of public financing and the continued need for IMF and World Bank monitoring and support.

Debt levels in many LICs remain relatively high following the COVID-19 fiscal stimulus and other shocks.
Debt vulnerabilities are being exacerbated by:
- uncertain global conditions, and
- a changing creditor landscape.
Domestic debt is increasingly important as a source of public financing in LICs.
The scale of identified vulnerabilities reinforces the need for:
- strong debt management, and
- enhanced debt transparency.
The IMF and the World Bank play a continued role in monitoring debt vulnerabilities and supporting countries through:
- policy advice,
- financial resources, and
- capacity building.

Strengthen debt management frameworks in LICs to sustain good relations with creditors and underpin sound financing decisions.
Enhance debt transparency to improve creditor relations and financing outcomes.
Continue and expand IMF and World Bank engagement focused on:
- monitoring debt vulnerabilities,
- providing policy advice,
- offering financial resources, and
- delivering capacity building tailored to domestic debt management challenges.

Subject areas: Debt service, Debt sustainability, Domestic debt, External debt, Public debt.
Keywords: Asia and Pacific, Caribbean, Central America, Debt burden, Debt burden indicator, Debt service, Debt sustainability, Debt transparency, Debt vulnerability, Domestic debt, Financing needs, Global, IMF policy, IMF staff, IMF-World Bank LIC-DSF, IMF-World Bank LIC-DSF database, South America, Sub-Saharan Africa, transparency policy.