Debt Sustainability Frameworks
How the international community tries to prevent debt crises before they happen, and why these frameworks keep failing.
The Debt Sustainability Framework
The IMF and World Bank's Debt Sustainability Framework (DSF), used for low-income countries since 2005, assesses whether a country's debt is sustainable by projecting debt burdens against thresholds that vary by the country's institutional quality. Countries are classified as at low, moderate, high, or in debt distress risk. The assessment determines how much the country can borrow from international institutions and on what terms.
By 2024, over 60% of low-income countries were classified as at high risk of debt distress or already in debt distress -- the highest share since the HIPC era. Countries like Zambia, Sri Lanka, Ghana, and Ethiopia have defaulted or required restructuring. The wave of distress is driven by a toxic combination: rising interest rates, COVID-related borrowing, commodity price volatility, and borrowing from commercial and Chinese creditors on harder terms than traditional aid.