The Sustainable Practice of Lending

Over the past decades Low-Income countries (LICs) have strengthened their economic and financial position and their debt indicators have dramatically improved.

However, risks of new unsustainable borrowing policies remain. LICs need to balance development priorities and the desire to save debt sustainability. Furthermore global downturn exacerbates macroeconomic vulnerabilities for poor countries posing additional challenges.

New spending policies could plunge these countries into debt distress once again. Hence the importance of developing sustainable lending practices, that is lending that supports a borrowing country’s economic and social progress without endangering its financial future and long-term development prospects.

Debt sustainability framework promoted by the International Financial Institutions, non-concessional borrowing policy and OECD guidelines to promote sustainable lending show a joint commitment to support Low-Income countries on their sustainable borrowing path.