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Debt

The World Bank Group (WBG) works closely with client countries to ensure that their debt burdens do not overwhelm their ability to reduce poverty or provide essential government functions. This work is structured through the Joint World Bank-IMF Debt Sustainability Framework for Low-Income Countries (DSF). For countries eligible for financing under IDA, these activities are financed through the Debt Management Facility (DMF), a WBG trust fund dedicated to strengthening debt-management capacity in developing countries.

Debt Sustainability & Grants

Under the Debt Sustainability Framework, countries are classified according to their risk of debt distress using a tool called Debt Sustainability Analysis (DSA). IDA translates debt distress risk ratings into "traffic lights", which then determine the share of IDA grants and highly concessional IDA credits for each country. Countries at high risk or in debt distress (red light) can benefit from 100% grants, medium-risk countries (yellow light) from 50%, while low-risk countries (green light) cannot benefit from grants. By boosting the share of grants for countries at risk of debt distress, IDA helps restore or maintain external debt sustainability and prospects for future assistance.

Non-Concessional Borrowing Policy

The Non-Concessional Borrowing Policy (NCBP) was adopted by IDA in 2006 to address the accumulation of external public debt and manage the growing demand for IDA grants. Debt relief provided through the Heavily Indebted Poor Countries Initiative (HIPC) and the Multilateral Debt Relief Initiative (MDRI), two WBG-led efforts to reducing external public debt among low-income countries, has proved successful in increasing beneficiary countries’ borrowing space. At the same time, the success of the two initiatives has raised concerns regarding potential rapid re-accumulation of debt as well as unsustainable demand for IDA grants.

The NCBP is a two-pronged policy entailing outreach to creditors and borrowers to maintain the dialogue on both the supply and demand side of debt flows. The policy applies to IDA-only countries that received debt relief from IDA or are IDA grant recipients in the current fiscal year. It does not apply to countries in blend and gap status. The NCBP is regularly reviewed and is currently being revised as part of the World Bank-IMF multi-pronged approach to address debt vulnerabilities.

Data Access and Transparency

The WBG is committed to facilitating access to debt analysis data to all users and stakeholders. The WBG maintains multiple databases that collect and disseminate public debt data, including International Debt Statistics (IDS), Quarterly Public Sector Debt Statistics Database (QPSD), and the Quarterly External Debt Statistics Database (QEDS). These are available on the Debt Data central hub. Further debt information is available here.

Concessionality & Grant Element Calculations

Low-income countries can evaluate the level of concessionality of the loan portion of WBG assistance (also known as ‘grant element’) using the online grant element calculator.

Relevant Events

  • IDA19 Replenishment Meeting – Debt: Emerging policy options to assist IDA countries (April 15, 2019; Washington, DC)
  • Consultations on Debt Dynamics in Africa (May 2019; Abidjan, Côte d'Ivoire) (co-hosted by AfDB)
  • IDA19 Replenishment Meeting – Debt session (June 16-17, 2019; Addis Ababa, Ethiopia)