The World Bank’s Role in and Use of the Low-Income Country Debt Sustainability Framework: Independent Evaluation Group

Abstract

This evaluation, requested by the Committee on Development Effectiveness of the Executive Board of the International Development Association (IDA), is intended to provide input and insight into the upcoming World Bank–International Monetary Fund (IMF) review of the Low-Income Country Debt Sustainability Framework (LICDSF) currently planned for fiscal year 2023. The sharp rise in debt stress among low-income countries and a changing global risk landscape leading up to and after the onset of the COVID-19 pandemic have pushed concerns with debt sustainability to the top of the global policy agenda. This evaluation assesses the World Bank’s inputs into the LIC-DSF and how it uses LIC-DSF outputs to inform various corporate and country-level decisions. Main findings and recommendations include: (i) Expectations of the World Bank in taking the lead on long-term growth prospects should be clarified. (ii) Recently increased attention to debt data coverage should be sustained and extended; greater attention is needed to assess data quality. (iii) The DSA should be more directly and consistently used to inform priorities for the identification of fiscally oriented prior actions in development policy operations and SDFP performance and policy actions. (iv) The World Bank should continue to give increasing attention in the LIC-DSF to the long-term implications of climate change, in terms of both growth and fiscal requirements of adaptation and mitigation.