IMF and World Bank Rewrite Debt Rules for 70 Poor Countries, Most in Africa
Key Facts
- —The country group About 70 poor countries, 39 of them in Africa, borrow mainly on cheap IMF and World Bank terms. Some 39 are in Africa, including Ethiopia, Kenya and Ghana.
- —Why it matters Since 2005 the IMF and World Bank have used a joint rulebook to judge whether these countries can repay. Its verdicts guide new lending and debt-restructuring talks.
- —Why now The rulebook was last updated in 2017. Since then debt has risen, more of it is borrowed at home or on commercial terms, and climate needs have grown.
- —What happened The IMF board backed an overhaul on 9 September and the World Bank board on 15 September. It adds checks on domestic debt and long-term climate and development needs.
- —The numbers About 14 percent of low-income countries are in debt distress and 33 percent at high risk, IMF official Allison Holland said.
- —What it means for you For investors in African government bonds and banks, risk ratings will weigh what governments owe local lenders more heavily from late 2027.
- —Still open The rules apply only from the second half of 2027, and the IMF will keep its new unsustainable-debt signals unpublished for now.
The International Monetary Fund and World Bank approved a debt rules overhaul for about 70 poor countries, 39 in Africa. From late 2027, domestic debt, climate adaptation and long-term development will weigh more in assessing a country’s debt risks.
The International Monetary Fund (IMF) board backed the reforms on 9 September, and the World Bank board approved them on 15 September. Both announced the decision on 21 September, and the changes become operational in the second half of 2027.
What the debt rules overhaul changes
It is the first review since 2017 of the joint Debt Sustainability Framework for Low-Income Countries (LIC-DSF), in use since 2005. It covers low-income countries worldwide that rely mainly on cheap, long-term IMF and World Bank loans.
A new module strengthens analysis of domestic debt, which now makes up most of sub-Saharan Africa’s public debt, according to IMF economists. The reforms also recalibrate and expand the thresholds that signal debt stress, adding new ones for overall public debt.
A long-term development module will help countries gauge how much budget room they have for infrastructure, human capital and climate adaptation. A parallel review kept the discount rate, used to calculate the present value of debt, unchanged at 5 percent.
For African governments, the practical effect is closer scrutiny of what they owe local banks and other domestic lenders. The review found the existing framework still “fit for purpose,” so the changes refine it rather than replace it.
Why domestic debt now matters more
Many sub-Saharan African governments have shifted from external borrowing toward domestic debt, especially after global markets shut many out in 2022. IMF economists warn this deepens the sovereign-bank nexus, where government stress feeds directly into local banks.
A 2024 United Nations report put Africa’s public debt at 68 percent of gross domestic product (GDP) in 2023. It put the continent’s external debt at US$656 billion in 2022, or 28 percent of GDP.
The goal is “to help countries identify vulnerabilities earlier and also more precisely,” said Allison Holland, an IMF African Department deputy director. Reuters quoted her as saying that about 14 percent of low-income countries are in debt distress and another 33 percent at high risk.
Senegal shows how the system works in practice
West African Senegal reached a preliminary agreement with IMF staff in early September for a three-year loan of about US$2.2 billion. The deal still needs IMF board approval, a waiver over past misreporting of debt, and financing assurances from partners.
Senegal plans to treat its external debt under an enhanced version of the Common Framework, a Group of 20 (G20) process. Launched in 2020, it brings official creditors such as China together and seeks comparable terms from private lenders.
The IMF has said it will judge Senegal’s debt under the current framework, while taking the transition into account. For investors, the signal is that the IMF and World Bank are refining how they measure risk, not abandoning loan conditions.
The great-power contest over African debt
Global debt governance is still being shaped by IMF and World Bank loan conditions, G20 coordination and creditor politics. China’s role in African debt remains a central tension, as Beijing often prefers bilateral deals over multilateral frameworks.
The reforms do not settle that contest, but they give the IMF and World Bank sharper tools where Chinese lending is large. The long-term module could also help countries make the case for climate and infrastructure spending.
This fits the wider pattern covered in Africa: The New Scramble, where finance, minerals and great-power rivalry intersect. Debt rules are not just technical documents; they are instruments of influence.
Who gains and who loses
Governments with heavy domestic borrowing get a framework that better reflects their actual risk profile. Countries seeking climate and infrastructure finance also get a clearer way to justify long-term spending.
Creditors, including China and private bondholders, face more detailed scrutiny of how their loans fit into a country’s overall debt picture. That could make some lenders more cautious, but it may also reduce the chance of messy defaults.
For ordinary citizens, the stakes are concrete: a typical sub-Saharan government spends about one-seventh of revenue on interest, IMF economists say. Debt service consumes money that could go to schools, clinics and roads, so better early warning matters beyond financial markets.
What to watch next
The reforms become operational in the second half of 2027, giving countries and creditors time to adjust. The IMF and World Bank must first publish a guidance note and a new analysis template and train country teams.
Senegal’s pending IMF programme will show how the transition works for a country already in crisis. Other heavily indebted West African economies will be watching closely.
The first debt analyses under the new rules will show whether the changes alter lending decisions or simply add paperwork. Most IMF directors agreed to keep the new model’s unsustainable-debt signals unpublished for now, though a few pushed for full publication.
Frequently Asked Questions
What is the Debt Sustainability Framework for Low-Income Countries?
It is a joint IMF and World Bank tool, used since 2005, to judge whether low-income countries can service their debts. It guides the two lenders’ decisions and informs debt restructuring talks.
When do the new debt rules take effect?
The debt rules overhaul becomes operational in the second half of 2027. The IMF board backed it on 9 September 2026 and the World Bank board approved it on 15 September.
Does the framework apply only to Africa?
No. It covers about 70 low-income countries worldwide that rely mainly on cheap, long-term IMF and World Bank loans. Some 39 are in Africa, including Ethiopia, Kenya and Ghana; others include Bangladesh and Haiti.
How much debt does Africa currently hold?
United Nations figures put Africa’s public debt at 68 percent of GDP in 2023 and external debt at US$656 billion in 2022. IMF economists say most of sub-Saharan Africa’s public debt is now domestic.
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