The International Monetary Fund and World Bank approved changes to their joint debt sustainability framework for low-income countries. The reforms add more systematic analysis of domestic debt and a module for climate and other long-term risks. They retain the framework's 5% discount rate. Implementation is planned for the second half of 2027.
The boards completed the first comprehensive review of the framework since 2017. The system is used to assess a country's risk of debt distress and to inform financing decisions by the two institutions. IMF figures cited in its announcement showed 14% of low-income countries already in debt distress and 33% at high risk.
BROADER DEBT RISK ANALYSIS
The revised approach will place greater weight on domestic borrowing, which has become more significant as many governments rely less exclusively on external creditors. It will also expand the treatment of contingent liabilities and introduce analysis intended to capture risks that build beyond the standard forecast horizon.
The institutions said the reforms should improve forecasts, debt data transparency and the calibration of public-debt thresholds. Reuters reported that the World Bank board approved the changes after an IMF board review, completing the governance process for the joint framework.
IMPLEMENTATION REMAINS AHEAD
The revised framework will affect how countries, creditors and development lenders interpret debt-carrying capacity and financing risks. Keeping the 5% discount rate avoids an immediate methodological shift in how future debt-service flows are valued, while the new modules broaden the risks considered.
Country assessments will continue under the existing framework while staff prepare guidance, data processes and training for the transition. The next concrete milestone is implementation in the second half of 2027, when new sustainability analyses are expected to begin using the revised methodology.