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

Report to the Board from the Committee on Development Effectiveness

The Committee on Development Effectiveness met to consider the report The World Bank’s Role in and Use of the Low-Income Country Debt Sustainability Framework and the draft management response.

The committee commended Independent Evaluation Group for the timely and relevant evaluation, noting that the findings and recommendations were relevant to inform the upcoming World Bank–International Monetary Fund Low-Income Country Debt Sustainability Framework review (LIC-DSF), which they underscored as a core diagnostic that serves a wide range of purposes, including the use of Debt Sustainability Analyses (DSAs) as an important signaling function to creditors and investors. They also emphasized that DSAs are a core analytical product that will need to be assessed in the context of the World Bank Group Evolution Roadmap. They appreciated management’s response and broad agreement with the report’s recommendations and were pleased to learn about both the quality of collaboration between the World Bank and the International Monetary Fund on the LIC-DSF and the improvements in the World Bank’s role in the assessment of long-term macroeconomic prospects.

Members took note of the progress on debt transparency, encouraged continued attention to debt data coverage and quality, and urged the World Bank to continue playing a crucial role in supporting debtors and creditors in these efforts. They stressed the need to ensure consistency of the analytical basis and related policy advice, and as such, welcomed management’s plans to strengthen long-term growth projections by enhancing long-term growth analytics based on Country Economic Memorandums, and to increase attention to debt vulnerability and long-term sustainable growth determinants in Country Partnership Frameworks. They agreed that the DSAs should be fully used to inform the prior actions of development policy operations as well as performance and policy actions in the Sustainable Development Finance Policy. Members also emphasized that forward-looking sustainability can no longer be separated from climate change, and urged increased focus on the analysis of the impact of climate change on debt sustainability, including ensuring alignment between DSAs and Country Climate and Development Reports.