DEBT SUSTAINABILITY FRAMEWORK FOR LOW INCOME COUNTRIES: POLICY AND RESOURCE IMPLICATIONS

The Debt Sustainability Framework sets out a proposal by the World Bank for identifying countries in actual or potential debt distress situations leading to a formula for determining grant eligibility within the amounts to be allocated during the Fourteenth Replenishment of IDA. It attempts to The Debt Sustainability Framework sets out a proposal by the World Bank for identifying countries in actual or potential debt distress situations leading to a formula for determining grant eligibility within the amounts to be allocated during the Fourteenth Replenishment of IDA. It attempts to classify countries based on the performance of their institutions and policies and determine thresholds for selected debt indicators for each country grouping and then estimate the level of debt distress as measured by the forecast levels of the selected indicators from the country DSAs. This leads to a formula for determining grant eligibility within the IDA allocation made on the basis of the Performance Based Allocation System that uses the Country Policy and Institutional Assessment and governance rating of the country concerned. The increase in grants has implications for the future of IDA funding which also needs consideration. more