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.
Sustainable Development Finance Policy (SDFP)
Starting from July 1st, 2020 all IDA countries will be subject to the Sustainable Development Finance Policy (SDFP). The SDFP will replace the Non-Concessional Borrowing Policy (NCBP), which has been in place since 2006 to address the accumulation of external public debt. A recent review of the NCBP informed the design of the SDFP.
The objective of the forthcoming SDFP will be to incentivize countries to borrow sustainably and promote coordination between IDA and other creditors in support of countries’ efforts. The policy has two pillars: (1) the Debt Sustainability Enhancement Program (DSEP) to help IDA countries address debt vulnerabilities through incentives and policy actions; and (2) the Program for Creditor Outreach (PCO) to facilitate information sharing, dialogue and coordination among creditors to help address debt-related risks, building on IDA’s global platform and convening role.
For more information about the SDFP:
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.
Consultations with IDA countries in the Latin America and Caribbean Region – February 20, 2020
Consultations with IDA countries in the Pacific Region – March 4, 2020
Consultations with IDA countries in South, Central and East Africa Region – March 19, 2020