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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

Development Association's “Traffic LightSystem The International Development Association's (IDA) traffic light system was introduced as part of the new framework for IDA grants under the IDA14 Replenishment agreement in mid-2005. The objective was to ensure that IDA's terms of financing for IDA-only countries are consistent with each country's risk of debt distress. Under IDA13, the overall grant percentage was negotiated and then allocated according to multiple criteria for grant eligibility. Under the IDA14 and IDA15 frameworks, the only grant eligibility criterion is

International Monetary Fund

Address Contracts with a Guaranteed Yield Measure Impact of Measure Comments Old contracts with high yield commitments—existing business Adjust methodology, require additional technical reserves, or ultimately more capital to increase the cushions. Will increase costs for companies if additional requirements are excessive. Can be imposed by the regulator if companies do not react in a timely manner. The DFSA has introduced stress test—the traffic light system—and fair value accounting on all assets from 2002 and on

International Monetary Fund
This technical note examines pensions with profit contracts in Denmark. The Danish life insurance and pension sector is sensitive to a range of risks on both the asset and liability side of the balance sheet. One of the principal vulnerabilities for the sector arises out of the requirement to achieve a high guaranteed return for the duration of “in-force” policies. Although several measures have been implemented to increase provisions and capital, and for hedging interest rate risk through derivatives, the overall risk in the pension sector still needs to be closely monitored.
International Monetary Fund
This paper reviews the experience with the joint IMF-World Bank Debt Sustainability Framework for low-income countries, including cooperation between the staffs, and highlights the implications of the Multilateral Debt Relief Initiative.
International Monetary Fund

reason to believe that the MDRI will not lead to an unwarranted increase in IDA lending, mitigating the need for lower thresholds. In itself, the reduction in the risk of debt distress as a result of MDRI relief would lead to an increased loan allocation to MDRI countries, but this is partially offset by the likely transition from the current traffic light system to the forward-looking joint DSA assessments, which tend to be somewhat more conservative than the static assessments under the traffic light system. Overall, a large shift in the loan/grant mix for MDRI

International Monetary Fund

. In June 2001, after negotiations with the industry, the DFSA introduced the red and yellow “traffic light” stress test scenarios for life insurers and pension funds. From end-2003, similar test scenarios were introduced in nonlife insurers. Companies and funds report the result of the stress tests biannually. The traffic light system supplements the required capital margin. At the end-2005, there were no life insurance companies or general pension funds in red light, but 6 companies in yellow light. 28. The red light scenario is a decrease of 12 percent in the