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Mr. Christian H. Beddies, Ms. Marie-Helene Le Manchec, and Ms. Bergljot B Barkbu

advice in these areas, and help detect potential crises early so that preventive action can be taken. The DSF facilitates information sharing, can serve as a coordinating device, and can help assess alternative borrowing strategies. The introduction of the DSF has improved access to information and emphasis on the debt situation in LICs, hence increasing borrowers', donors', and lenders' capacity to make informed decisions, ultimately reducing the risk of renewed debt problems. For most LICs, concessional flows will remain the most appropriate source of external

Mr. Christian H. Beddies, Ms. Marie-Helene Le Manchec, and Ms. Bergljot B Barkbu

Abstract

Borrowing can help achieve economic and social objectives, and debt is its consequence. Many low-income countries (LICs) require substantial external financing to reach their development objectives, and stepped-up investment in infrastructure is critical to achieve sustained growth and development. External debt financing can help in this regard by channeling resources to projects where the rate of return of the debt-financed investment is at least sufficient to service the debt incurred.

Mr. Christian H. Beddies, Ms. Marie-Helene Le Manchec, and Ms. Bergljot B Barkbu

Abstract

When governments face resource constraints, they often resort to borrowing to finance their expenditure plans. When outlays exceed revenues, a government has two basic options: eliminate the deficit by cutting expenditures or raising more revenues, or finance it through new (net) borrowing, which increases the stock of public debt. Governments may borrow by issuing securities, such as government bonds and bills, or through loans from domestic or foreign institutions (Box 2.1).

Mr. Christian H. Beddies, Ms. Marie-Helene Le Manchec, and Ms. Bergljot B Barkbu

Abstract

Low-income countries continue to face significant challenges in meeting their vast development needs while maintaining a sustainable debt position, even after many of these countries have benefited from substantial debt relief. These challenges are further exacerbated by changes in the financial landscape, including the emergence of new creditors and investors, the use of more complex financing vehicles, and the development of domestic markets. The joint World Bank/IMF debt sustainability framework is well placed to help address these challenges and reduce the risks of renewed episodes of debt distress. This paper explains the analytical underpinnings of the framework and the means to ensure its full effectiveness.

Mr. Christian H. Beddies, Ms. Marie-Helene Le Manchec, and Ms. Bergljot B Barkbu

Abstract

Assessments of external and fiscal sustainability are key elements of the IMF's work. The IMF's advice on macroeconomic policies, in the context of both IMF-supported programs and surveillance, is anchored in an analysis of a country's capacity to finance its policy objectives and service the ensuing debt without unduly large adjustments that may compromise its stability and that of its economic partners.

Mr. Christian H. Beddies, Ms. Marie-Helene Le Manchec, and Ms. Bergljot B Barkbu

Abstract

To make it a fully effective tool, borrowers, donors, and lenders must act in broad harmony with the DSF. The DSF helps inform borrowers about the amount and types of financing that are consistent with long-term debt sustainability and progress toward achieving their development objectives. It also provides guidance to donors and lenders on lending and grant-allocation decisions that are consistent with these goals. The DSF can thus help minimize the risk of debt crises and promote the use of scarce concessional resources by the countries that need them most. Its effectiveness in achieving these objectives increases with the number of borrowers, donors, and lenders using it.

International Monetary Fund. Secretary's Department

, resulting in positive growth, lower inflation, and more sustainable balance of payments positions. However, performance has remained unsatisfactory in those countries where the resolve to take vigorous steps toward stabilization and reform is lacking. Such problems cannot be resolved simply by external financing. Moreover, those countries that, as a consequence of successful policies, are again recording high net capital imports should ensure that resources are put to productive use in order to avoid renewed debt problems. Only in this way can external financial support