Supplement to 2018 Guidance Note on the Bank-Fund Debt Sustainability Framework for Low Income Countries - July 18, 2024 - Executive Summary

Jul 19, 2026

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Supplement provides additional guidance for IMF and World Bank staff on implementing the Bank-Fund Debt Sustainability Framework for Low Income Countries (LIC-DSF). It updates the 2018 guidance note by addressing heightened climate change risks, evolving domestic public debt vulnerabilities, and increased complexity in debt restructuring applications. The supplement clarifies when to explicitly include climate risks and climate investments in debt sustainability analysis, including baseline and alternative scenarios, volatility, and innovative instruments, and offers granular, risk-based qualitative guidance for domestic vulnerabilities and restructuring targets and DSA presentation.

LanguageEnglish

CategoryResearch & Report

FormatPDF

Pages32

Reading Time1 h 21 min

Executive Summary

Climate change

Domestic public debt vulnerabilities

Use of the LIC-DSF in debt restructuring situations

Boxes

Figures

References

Public Disclosure Authorized Public Disclosure Authorized INTERNATIONAL DEVELOPMENT ASSOCIATION INTERNATIONAL MONETARY FUND SUPPLEMENT TO 2018 GUIDANCE NOTE ON THE BANK-FUND DEBT SUSTAINABILITY FRAMEWORK FOR LOW INCOME COUNTRIES July 18, 2024 Prepared by the staffs of the World Bank Group and the International Monetary Fund1 Approved by Manuela Francisco (WB) and Guillaume Chabert (IMF) 1 Prepared by a team led from the IMF’s Strategy, Policy, and Review Department, by Plamen Iossifov, consisting of Christopher Dielmann, Karim Foda, Miguel Ricaurte, and Igor Zuccardi, under the overall guidance of Allison Holland; and a team from the World Bank’s Macroeconomics, Trade, and Investment Global Practice, led by Luca Bandiera, consisting of Juan Hernandez, David Mihalyi, Mellany Pintado, and Madi Sarsenbayev under the overall guidance of Frederico Gil Sander. Administrative assistance was provided by Eiman Afshar and Claudia Isern. EXECUTIVE SUMMARY This supplement provides additional guidance to IMF and World Bank staff on the implementation of the Bank-Fund Debt Sustainability Framework for Low Income Countries (LIC-DSF) approved in 2017 by the IMF and World Bank Boards. It complements the 2018 Bank-Fund guidance note on the LIC-DSF (IMF and WB, 2018). This provides further guidance and practical examples on how to account in a more structured way for risks stemming from climate change and domestic public debt vulnerabilities, which have become more prominent since the last review of the LIC-DSF in 2017, and on the use of the LIC-DSF in debt restructuring situations, which have increased in complexity in recent years. It has been prepared as a first step to address these issues, within the current IMF and World Bank Boards-approved framework, while the deeper review of the LIC-DSF is still progressing. The full review will seek to address these and other issues in greater depth, by exploring ways to adapt the framework to the evolving landscape of debt vulnerabilities and to keep it up to date with analytical advances. Climate change. This supplement clarifies when climate change risks and climate investments and policies have to be explicitly taken into account in the debt sustainability analysis (DSA). It discusses the general modalities of their incorporation in the central projections in the baseline or in alternative scenarios and in their expected volatility. It also provides guidance on how to account for climate-related innovative debt instruments in DSAs. Domestic public debt vulnerabilities. This supplement provides more granular guidance on how to account for domestic public debt vulnerabilities into the risk and sustainability assessments of overall public debt, through a risk-based qualitative analysis centered around the dynamics of public debt stock and debt service, and the consistency of the domestic public borrowing plan with maintaining macroeconomic and financial stability. Use ofthe LIC-DSFin debt restructuring situations. This supplement provides further guidance on: (i) setting of debt restructuring targets where a debt restructuring is undertaken in the context of a Fund-supported program; (ii) the modalities of DSA scenario analysis to help the authorities assess the relative merits of different restructuring proposals, with special attention to cases where domestic public debt or statecontingent debt instruments (SCDIs) are involved; and (iii) on the presentation of the DSA analysis at different stages ofthe restructuring process. All aspects of the 2018 LIC-DSF Guidance Note remain in effect, except as modified below. TABLE OF CONTENTS SECTION I. CONTEXT _______________________________________________________________________________ 5 SECTION II. SUPPLEMENTARY GUIDANCE ___________________________________________________________ 6 A. Climate-Change _________________________________________________________________________________ 6 B. Domestic Public Debt Vulnerabilit

FAQs

What is the purpose of this supplement to the 2018 LIC-DSF guidance note?

It provides additional, practical guidance to IMF and World Bank staff on implementing the LIC-DSF, especially for climate change risks, domestic public debt vulnerabilities, and debt restructuring cases whose complexity has increased since 2017.

When must climate change risks and climate investments be explicitly included in debt sustainability analysis?

The supplement clarifies the conditions under which climate risks and climate investments and policies must be explicitly taken into account in the debt sustainability analysis, including how to incorporate them into central projections or alternative scenarios and how to reflect their expected volatility.

How does the supplement guide risk assessment for domestic public debt vulnerabilities and use in restructuring?

It provides more granular, risk-based qualitative guidance centered on the dynamics of public debt stock and debt service and the consistency of domestic borrowing plans with macroeconomic and financial stability. It also expands guidance on setting restructuring targets in Fund-supported programs and on how to run and present DSA scenario analysis at different restructuring stages.

Jul 19, 2026

Upload by Asher