The Debt Sustainability Framework (DSF), developed in 2005, is designed to guide the borrowing decisions of low-income countries in a way that matches their financing needs with their current and prospective ability to repay debt. It also allows creditors to tailor their financing terms in anticipation of future risks.
A key part of the framework is Debt Sustainability Analysis (DSA), a structured examination of a country's debt that debt experts from the IMF and World Bank conduct regularly in low-income and middle-income countries. Some of the focal points of these analyses are:
- an analysis of a country’s projected debt burden over the next 20 years and its vulnerability to external and policy shocks;
- an assessment of the risk of external debt distress in that time, based on indicative debt burden thresholds that depend on the quality of the country’s policies and institutions; and
- recommendations for a borrowing (and lending) strategy that limits the risk of debt distress.