The IMF Executive Board reviewed the joint IMF-World Bank Debt Sustainability Framework for Low-Income Countries on September 9.
The framework helps governments, creditors and development partners assess whether countries can meet debt obligations without compromising economic stability or essential public spending.
Since the previous review in 2017, debt levels have risen in many low-income countries, while governments have increasingly borrowed on commercial terms from domestic and international markets.
The IMF said the framework had successfully identified debt problems in advance and remained “fit for purpose”, but required adjustments to reflect a more complex financing environment.
The revised framework will distinguish more clearly between countries experiencing debt pressure and those whose debt is considered unsustainable.
Debt-carrying capacity measurements and thresholds will be recalibrated, with new tools introduced to assess overall public debt risks.
Domestic borrowing will receive greater attention because of the growing importance of local-currency debt in many low-income countries.
The framework will also examine long-term financing pressures from development and climate-adaptation needs.
The IMF said this would help countries determine how much fiscal space remained available for essential investment without creating unsustainable debt burdens.
Forecasting tools and stress tests will be strengthened to improve the consistency and accuracy of debt projections.
Debt coverage will include greater scrutiny of state-owned enterprises, special-purpose entities and other public-sector liabilities.
Countries will also receive a confidence rating based on the quality, coverage, transparency and reliability of public debt data.
IMF Directors said improved data requirements should not unfairly penalise countries making genuine efforts to strengthen reporting.
The reforms will retain structured judgement in final debt assessments, allowing country-specific conditions to be considered while promoting consistent treatment.
The harmonised discount rate used under the framework and the IMF Debt Limits Policy will remain unchanged at 5%.
Implementation is expected during the second half of 2027, following publication of operational guidance and training for country authorities and IMF teams.
The IMF said clear communication, capacity development and continued engagement with governments, creditors, civil society and other stakeholders would be essential for a smooth transition.
The revised framework will apply to country documents submitted for Executive Board consideration after the IMF’s 2027 summer recess.
–IMF/ChannelAfrica–
