World Bank, IMF back debt framework changes for poor countries
WASHINGTON: The World Bank and International Monetary Fund said on Monday that both their executive boards had approved proposed reforms of their joint framework for evaluating the debt of low-income countries to reflect a more complex and riskier environment. A joint review, the first since 2017, recommended changes in several areas, including better analysis of domestic debt and broadening the…
The World Bank and International Monetary Fund announced on Monday that their executive boards have approved reforms to their joint framework for assessing the debt of low-income countries. This review, the first since 2017, recommended changes across several key areas in response to a more complex and riskier global environment.
The reforms aim to enhance the analysis of domestic debt and incorporate a broader assessment of long-term development challenges, including the impacts of climate change. Additionally, the World Bank and IMF plan to refine their methods for measuring countries' debt-carrying capacity and introduce new tools to better evaluate debt sustainability.
The World Bank and IMF also intend to strengthen the "realism tools" and stress tests used to ensure the accuracy and consistency of their debt forecasts. Furthermore, they will work to promote greater transparency in countries' debt data reporting.
The joint review, completed in July, confirmed that the current debt sustainability framework has effectively identified debt distress episodes before they occur. However, it also identified several areas where the framework could be improved to better address emerging challenges amid rising development needs and a significant decline in official development assistance.
The revised framework is expected to become operational in the second half of 2027.
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