IMF and World Bank approve reform of debt assessment framework for low-income countries, to take effect in the second half of 2027
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The World Bank and the International Monetary Fund, or IMF, announced on Monday, September 21, that the executive boards of both organizations have approved a joint reform of the debt sustainability assessment framework for low-income countries, to better reflect a more complex economic environment and rising risks. The changes will begin to be applied in the second half of 2027 and will help countries better assess how much they can invest in necessary development projects and climate change response measures while still controlling long-term debt vulnerabilities. The review of the framework, the first since 2017, proposes adding analysis of domestic debt in poor countries and expanding consideration of long-term development challenges such as climate change, but does not propose a complete redesign of the assessment framework. The two organizations will develop tools and stress tests to improve the consistency and accuracy of projections, and will encourage countries to improve their reporting and the transparency of debt data, while keeping the discount rate used in assessments at 5%. Allison Holland, deputy director of the IMF's Africa department, who took part in drafting the new framework, said the goal is to help countries identify vulnerabilities faster and more accurately, noting that about 14% of low-income countries are currently in debt distress and another 33% are at high risk, while about 23% of emerging market countries face a high risk of overall public debt stress.