World Bank, IMF back debt framework changes for poor countries

The World Bank and International Monetary Fund (IMF) on Monday approved proposed reforms to their joint framework for assessing the debt sustainability of low-income countries, citing a more complex and riskier global financial environment,according to agency reports.The reforms follow the first joint review of the framework since 2017 and aim to strengthen the assessment of debt risks facing low-income countries.
According to the World Bank, the review recommended several changes, including a more detailed analysis of domestic debt and a broader assessment of long-term development challenges, including climate change.The revised framework will improve debt sustainability analysis by refining how countries’ debt-carrying capacity is measured and introducing new tools to assess debt risks.
The World Bank and IMF will also enhance the “realism tools” and stress tests used to improve the consistency and accuracy of economic forecasts. The institutions will further encourage countries to strengthen debt data transparency.The Debt Sustainability Framework is used by the World Bank and IMF to assess whether countries can take on additional debt without putting their ability to service existing obligations at risk.
The changes come as many low-income countries face rising debt levels and increasingly rely on both domestic borrowing and external financing on commercial terms.The review, completed in July, found that the framework had generally worked well in identifying episodes of debt distress in advance and supporting informed borrowing and lending decisions.However, it also identified areas for improvement amid higher development needs and a sharp decline in official development assistance.The revised framework is expected to become operational in the second half of 2027.

(Business Correspondent)