Launched in November 2008, the Debt Management Facility (DMF) for Low-Income Countries (LICs) is a multi-donor trust fund that supports the scaling up and accelerated implementation of the World Bank Group's debt management work program in low-income countries. The trust fund is administered jointly by the World Bank and International Monetary Fund. The program has the specific objective of strengthening debt management capacity and institutions through a number of tools that help countries assess and plan their debt. The DMF also helps empower debt managers faced with political pressure to advocate for a prudent and sustainable approach to taking on new debt.
The DMF launched a third phase in March 2019. Its objective during the next five years is to strengthen debt management to reduce debt-related vulnerabilities and improve debt transparency. DMF III seeks to provide customized advice on sovereign debt management through the design and application of analytical tools, provision of tailored advisory services and implementation support, trainings, webinars and peer-to-peer learning. DMF III facilitates collaboration among debt management technical assistance providers and dialogue on debt issues among different stakeholders.
For a decade, the DMF has been supporting capacity building and reform implementation on debt management in over 80 countries, and has become an internationally recognized global program. With a proven record of excellence in building capacity in debt management and related fields since 2009, the DMF has supported over 280 Technical Assistance (TA) missions in about 80 countries and 14 subnational entities.
Significant strides have been made in debt management since 2008 in DMF-eligible countries. Today, more countries prepare and publish debt management strategies; the quality of debt records of government debt has improved; and many countries have improved the organization of their debt management institutions and coordination with fiscal policies through alignment with medium term fiscal frameworks.
Despite progress, important challenges remain. The financial landscape of DMF-eligible countries has evolved, presenting new opportunities and risks. The composition of debt portfolios is gradually shifting away from mainly concessional external debt to market-based debt. Domestic debt borrowing has increased rapidly, even in countries with small financial sectors and with weak debt management capacity. DMF III is uniquely positioned to adapt to emerging debt management challenges and is a critical component of the Bank-Fund Multipronged Approach for Addressing Emerging Debt Vulnerabilities.