Changing Patterns in Low-Income Country Financing and Implications for Fund Policies on External Financing and Debt

Low-income countries (LICs) face significant challenges in meeting their development objectives while maintaining a sustainable debt position.
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Volume/Issue: Volume 2009 Issue 015
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Exports and Imports , Public Finance , PP , debt vulnerability , concessionality requirement , debt distress , burden indicator , debt sustainability , debt issuance , burden threshold , debt situation , debt concessionality , debt burden , concessional debt , distress rating , Debt limits , Debt sustainability , Debt sustainability analysis , West Africa

Summary

Low-income countries (LICs) face significant challenges in meeting their development objectives while maintaining a sustainable debt position. The international community’s main answer to this dilemma has been to promote recourse to concessional external resources. The Fund’s recommendations to LICs conform to this preference: the practice in Fund-supported programs in LICs has generally been to set zero limits on nonconcessional external borrowing while not restricting concessional financing, although flexibility has been applied on a case-by-case basis to allow some nonconcessional borrowing when warranted.