Approved by: Prepared by the staff of the International Manuela Francisco and Abebe Adugna (IDA) Development Association (IDA) and the and Montfort Mlachila and Bjoern Rother IMF) International Monetary Fund (IMF)1 LIBERIA: JOINT BANK-FUND DEBT SUSTAINABILITY ANALYSIS2 Risk of external debt distress Moderate Overall risk of debt distress High Granularity in the risk rating Limited space to absorb shocks Application of judgment No This DSA is prepared jointly by the staff of the IMF and the World Bank, in collaboration with the authorities of Liberia. The Debt Sustainability Analysis assesses Liberia at moderate risk of external debt distress and at high debt distress risk for total public debt with limited space to absorb shocks. Staff judges public debt to be sustainable. More than 90 percent of external debt is on highly concessional terms and held by multilateral lenders. The bulk of domestic debt is owed to the Central Bank of Liberia (CBL) at favorable terms. Still, domestic debt is mostly denominated in U.S. dollars posing further vulnerabilities. Liberia is front-loading the contracting of debt from development partners. In the baseline projections, the distress risk rating for total public debt improves to moderate in 2030 and remains moderate for external debt throughout. The projections are predicated on prudent fiscal policies: largely avoiding non-concessional external borrowing in the nearer term; reducing the fiscal deficit from 7.1 percent of GDP in 2023 to an average of 2.6 percent of GDP during 2024-29; and continuously consolidating thereafter to stabilize the PV of total public debt as necessary investment is increasingly financed on non-concessional terms in the face of reduced donor financing. Negative shocks to economic growth, and a possible relapse of fiscal indiscipline are downside risks. 1 Debt coverage has remained the same as in the previous DSA. 2 Liberia’s debt-carrying capacity as determined by the Composite Indicator (CI) is assessed as weak. At 2.51 the CI score based on the October 2024 WEO data and the 2022 Country Policy and Institutional Assessment (CPIA) points to weak ranking. To change the debt carrying capacity to medium two consecutive signals are needed. 1 >>> 1. The DSA includes central government debt, central government guaranteed debt, and central bank debt contracted on behalf of the government (Text Table 1).3 Subsectors of the public sector Check box 1 Central government X 2 State and local government 3 Other elements in the general government 4 o/w: Social security fund 5 o/w: Extra budgetary funds (EBFs) 6 Guarantees (to other entities in the public and private sector, including to SOEs) X 7 Central bank (borrowed on behalf of the government) X 8 Non-guaranteed SOE debt Public debt coverage and the magnitude of the contingent liability tailored stress test 1 The country's coverage of public debt The central government, central bank, government-guaranteed debt Default Used for the analysis Reasons for deviations from the default settings 2 Other elements of the general government not captured in 1. 0.5 percent of GDP 0.5 3 SoE's debt (guaranteed and not guaranteed by the government) 1/ 2 percent of GDP 2 4 PPP 35 percent of PPP stock 12.70 5 Financial market (the default value of 5 percent of GDP is the minimum value) 5 percent of GDP 5 Total (2+3+4+5) (in percent of GDP) 20.2 1/ The default shock of 2% of GDP will be triggered for countries whose government-guaranteed debt is not fully captured under the country's public debt definition (1.). If it is already included in the government debt (1.) and risks associated with SoE's debt not guaranteed by the government is assessed to be negligible, a country team may reduce this to 0%. • The external and the domestic debt of the central government is fully covered in the DSA. The external debt in 2023 includes US$1,473.6 million debt to multilateral lenders, US$115 million debt to official bilateral lenders, and US$37.9 million debt to commercial lenders. The domestic debt mostly consists of US$619.5 million in government borrowing from the CBL and US$200.6 million in sovereign bonds held by commercial banks as at end-2023. The US$619.5 million debt from the CBL largely reflects legacy debt that was restructured, securitized, and fully recognized in 2019. 4 Of the US$200.6 million debt with banks, local currency debt accounts for about a quarter. • The State-Owned Enterprise (SOE) debt is generally guaranteed by the government or reflects funds borrowed externally by the government and on-lent to SOEs and as such is captured by the DSA. Liberian SOEs are unable to secure external funding without government guarantees given the lack to market access. However, there could be SOE debt owed to domestic banks that escapes the DSA. The government is making efforts to improve SOE debt transparency: their annual and quarterly Debt Management Reports include detailed information on SOE debt,5 guaranteed and non-guaranteed, direct and on-lent. 3 The definition of external and domestic debt uses a residency criterion. 4 The stock of GoL domestic debt due to the CBL has increased by nearly half between end-2021 and end-2023 following the CBL on-lending of SDR resources in 2022-23 and CBL direct lending to the government in 2023. 5 In May 2024, the Government published its Annual Public Debt Management Report, with coverage of detailed debt data (on-lent, guaranteed and non-guaranteed) reported by 15 SOEs representing 65.8 percent of SOE contingent liabilities by end June 2023. The SOE external liabilities guaranteed by the government are all included in the total public and publicly guaranteed debt. The report includes the information on issuance dates, maturity dates, interest rates, issuance currency, disbursed amounts, repaid principals, and current stocks for loans contracted with commercial banks and on-lent debt. These upgrades were supported by the World Bank. 2 >>> • The CBL debt is all external and is included in the DSA. The IMF credit to the CBL, amounting to US$228.3 million at end-2023, a decline compared to US$278.3 million at end-2021 largely due to the U.S. dollar appreciation, is recorded as external debt, whether on-lent to the government or not. On-lent funds that are repaid by the CBL but not yet reimbursed by the government are recorded as domestic debt. • Local governments have no access to external financing. Hence, it is only domestic borrowing by SOEs and local governments, as well as private sector external borrowing that escapes the DSA. The amounts involved are deemed to be small. 6 2. This DSA is being conducted in the context of the request for a forty-month arrangement under the ECF. The last Low-Income Country DSA (LIC-DSF) was considered by the Executive Board in August 2022 as part of the 2022 Article IV and the completion of the fourth review of the ECF arrangement.7 Liberia continues to be subject to the IDA Sustainable Development Finance Policy Text Figure 1. Stock of Public Debt, 2016-22 (Percent of GDP) (SDFP). 70 60 3. In 2023, total public debt 50 reached US$2,582 million (58.8 percent 40 of GDP), up from US$1,869 million 30 (53.3 percent of GDP) in 2021. In present 20 value terms, the public debt to GDP ratio 10 reached 41.6 percent in 2023, providing a 0 2016 2017 2018 2019 2020 2021 2022 notably higher starting point than the External debt Domestic debt 36.7 percent in the previous DSA. Sources: Liberian authorities and IMF staff calculations. Domestic borrowing accounted for most of the expansion in public debt due to a sharp increase in CBL lending to the government, including the on-lending of the proceeds from the exchange of SDRs for freely usable currency, coupled with a substantial increase in domestic commercial bank lending. Debt has accumulated rapidly after the completion of the HIPC/MDRI initiative in 2010 as the government scaled up infrastructure spending and responded to a series of adverse shocks. Public debt increased strongly 6 The contingent liabilities shock from the SOE debt is kept at the default value of 2 percent to reflect risks associated with non-guaranteed SOE debt, excluded from the analysis due to data availability constraints. The SOE Reporting and Coordination Unit (SOERCU) of the MFDP monitors and reports on the performance of 15 out of 39 registered SOEs in Liberia, but the reports do not provide any specific information about non-guaranteed SOE debt. The amended PFM Act strengthens requirements for reporting and monitoring of SOE debt, including non-guaranteed debt. Going forward, the external debt coverage will be expanded as the government plans to include SOE’s non -guaranteed debt into public sector debt. The authorities’ efforts to expand and improve SOE debt transparency have been supported by the World Bank’s SDFP for the past two years. 7 This DSA is prepared jointly by the staff of the IMF and the World Bank, in collaboration with the authorities of Liberia. The current DSA follows the revised Debt Sustainability Framework (DSF) for LICs and Guidance Note (2017) in effect as of July 1, 2018. The last joint DSA can be found in IMF Country Report No. 22/296, September 14, 2022. 3 >>> in 2019 and 2020, because of the recognition of the legacy debt, mainly monies owed by the government to the CBL. 4. During 2019-23, the years of the COVID-19 pandemic and heightened food insecurity, Liberia’s external debt stock increased sharply, notwithstanding substantial non-debt-creating international support. External debt rose by over 50 percent from US$1,075 million to US$1,627 million between December 2019 and December 2023. This includes US$228.3 million in borrowing from the IMF under the ECF arrangement and the RCF disbursement. Indebtedness to other multilateral lenders increased by US$543 million, with the World Bank accounting for US$386 million. Much of the other support from the international community did not create debt, notably relief of US$65 million under Text Table 2. Comparison of the External Debt in DSA and DRS datasets the IMF’s CCRT,8 US$353 million in 1,2 3 DRS Data DSA Data Difference general SDR allocation to Liberia, and 2021 2021 US$55 million in grants from the World (million USD) (million USD) Bank. Because of strong nominal GDP Government debt 1,439 External Debt 1,846 1,305 541 growth and valuation effects from the Bilateral 152 113 39 appreciation of the Liberian dollar, the ratio China 59 54 4 of external debt to GDP rose much less India 1 1 0 Kuwait 20 21 0 during 2019-2023, increasing from Saudi Arabia 37 37 0 34.9 percent of GDP to 37.1 percent of Other 35 0 35 GDP, with a peak of 41.1 percent of GDP Multilateral 1,694 1,191 502 African Dev. Fund 162 194 -32 in 2020 during the COVID-19 pandemic. IDA 616 607 9 Still, external debt as a share of GDP at 799 278 521 IMF end-2023 was lower in present value terms Intl Fund Arg (IFAD) 25 23 2 (21.0 vs. 23.7 percent) than projected in OPEC Fund for Intl Development 12 13 -1 European Invest Bank 52 46 6 the previous DSA. Text Table 2 compares BADEA /ABEDA 26 27 0 external debt stock at end-2021 in the DSA ECOWAS / CEDEAO 2 2 0 with the World Bank’s Debt Reporting African Export-Import Bank - 2 -2 System (DRS) data. The main source of 1/2021 is the last year for which DRS data is available. 2/DRS only includes external debt data. difference between the two datasets is the 3/The main difference is because the DRS dataset includes the SDR allocations of 2009 and 2021 treatment of debt to the IMF. The DRS in debt to IMF. includes the SDR allocations of 2009 and 2021 as external debt, whereas the DSA does not. 5. The stock of domestic debt increased by 27 percent in 2023 reflecting a sharp deterioration in government finances. Domestic debt increased by US$203 million in 2023 largely reflecting government borrowing from the CBL and an increase in government debt to non-financial institutions. In 2023, the CBL provided direct credit to the government (US$83 million) in light of deteriorating revenues and spending pressures. CBL on-lending of SDRs to the government further increased domestic debt by US$40 million in 2023. Domestic debt due to non-financial institutions increased by US$81 million, reflecting an increase in government debt due to the National Social Security and Welfare Corporation (NASSCORP) and recognition of government liabilities to domestic suppliers. The increase in domestic debt was mitigated by servicing 8 The DSA and macro-framework assume CCRT debt service relief through April 2022 . 4 >>> around US$23 million of existing domestic debt, while a significant share of government debt with commercial banks maturing in 2023 was rolled over. Debt Stock (end of period) Debt Service 2021 2023 2020 2021 2022 2023 2020 2021 2022 2023 million Percent Percent million Percent Percent million USD Percent GDP USD total debt GDP USD total debt GDP Total 1869.5 100.0 53.3 2582.0 100.0 58.8 81.2 120.2 177.9 254.4 2.7 3.4 4.5 5.8 External 1304.9 69.8 37.2 1626.9 63.0 37.1 49.2 56.9 67.5 76.3 1.6 1.6 1.7 1.7 3 Multilateral creditors 1191.7 63.7 34.0 1504.6 58.3 34.3 52.1 51.3 65.6 72.2 1.7 1.5 1.7 1.6 IMF 278.3 14.9 7.9 228.3 8.8 5.2 32.8 32.4 37.1 38.5 1.1 0.9 1.0 1.0 World Bank 606.9 32.5 17.3 853.6 33.1 19.4 4.5 7.6 13.6 18.6 0.1 0.2 0.4 0.5 ADB/AfDB/IADB 193.9 10.4 5.5 249.2 9.7 5.7 Other Multilaterals 112.5 6.0 3.2 173.5 6.7 4.0 o/w: European Investment Bank 45.6 2.4 0.8 39.0 1.5 0.7 o/w: Arab Bank for Economic Development in Africa 26.7 1.4 1.3 32.0 1.2 0.9 list of additional large creditors2 0.0 0.0 0.0 0.0 Bilateral Creditors 111.9 6.0 3.2 115.0 4.5 2.6 2.7 1.8 2.5 3.0 0.1 0.1 0.1 0.1 Paris Club 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 o/w: list largest two creditors 0.0 0.0 0.0 0.0 o/w: list largest two creditors 0.0 0.0 0.0 0.0 list of additional large creditors2 0.0 0.0 0.0 0.0 Non-Paris Club 111.9 6.0 3.2 115.0 4.5 2.6 2.7 2.3 4.0 4.1 0.1 0.1 0.1 0.1 o/w: Saudia Arabia 36.9 2.0 1.1 40.2 1.6 0.9 o/w: Kuwait 20.5 1.1 0.6 20.3 0.8 0.5 o/w: China EXIM 49.5 2.6 1.4 49.5 1.9 1.1 list of additional large creditors2 0.0 0.0 0.0 0.0 Bonds 0.0 0.0 0.0 0.0 0.0 0.0 Commercial creditors 1.4 0.1 0.0 6.9 0.3 0.2 1.1 0.6 1.0 0.1 0.0 0.0 0.0 0.0 o/w: India EXIM 1.4 0.1 0.0 0.0 0.0 0.0 2 list of additional large creditors 0.0 0.0 0.0 0.0 Other international creditors 0.0 0.0 0.0 0.0 o/w: list largest two creditors 0.0 0.0 0.0 0.0 2 list of additional large creditors 0.0 0.0 0.0 0.0 Domestic 564.6 30.2 16.1 955.1 37.0 21.8 32.0 63.3 110.4 178.1 1.1 1.8 2.8 4.1 Held by residents, total 564.6 30.2 16.1 955.1 37.0 21.8 32.0 63.3 110.4 178.1 1.1 1.8 2.8 4.1 Held by non-residents, total 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 T-Bills 51.6 2.8 1.5 39.9 1.5 0.9 2.0 24.0 61.0 126.5 0.1 0.7 1.5 2.9 Bonds 430.8 23.0 12.3 649.5 25.2 14.8 23.2 26.5 27.7 32.2 0.8 0.8 0.7 0.7 Loans 70.1 3.8 2.0 135.0 5.2 3.1 6.8 12.8 21.7 19.4 0.2 0.4 0.5 0.4 Memo items: Collateralized debt4 0.0 0.0 0.0 0.0 0.0 0.0 o/w: Related 0.0 0.0 0.0 0.0 0.0 0.0 o/w: Unrelated 0.0 0.0 0.0 0.0 0.0 0.0 Contingent liabilities 0.0 0.0 0.0 0.0 0.0 0.0 o/w: Public guarantees 0.0 0.0 0.0 0.0 0.0 0.0 5 o/w: Other explicit contingent liabilities 0.0 0.0 0.0 0.0 0.0 0.0 Nominal GDP 3508.9 4390.5 1/As reported by Country authorities according to their classification of creditors, including by official and commercial (except for Afreximbank which is classified as commercial to be consistent with the DSA classification). Debt coverage is the same as the DSA. 2/ Individual creditors accounting for more than 5 percent of total debt. 3/ "Multilateral creditors” are simply institutions with more than one official shareholder and may not necessarily align with creditor classification under other IMF policies (e.g. Lending Into Arrears) 4/ Debt is collateralized when the creditor has rights over an asset or revenue stream that would allow it, if the borrower defaults on its payment obligations, to rely on the asset or revenue stream to secure repayment of the debt. Collateralization entails a borrower granting liens over specific existing assets or future receivables to a lender as security against repayment of the loan. Collateral is “unrelated” when it has no relationship to a project financed by the loan. An example would be borrowing to finance the budget deficit, collateralized by oil revenue receipts. See the joint IMF-World Bank note for the G20 “Collateralized Transactions: Key Considerations for Public Lenders and Borrowers” for a discussion of issues raised by collateral. 5/ Includes other-one off guarantees not included in publicly guaranteed debt (e.g. credit lines) and other explicit contingent liabilities not elsewhere classified (e.g. potential legal claims, payments resulting from PPP arrangements). 6. At end-2023, nearly two thirds of Liberia’s debt was held by multilateral lenders (Text Table 3). The World Bank and the IMF are Liberia’s two largest external creditors. At end -2023, the outstanding stock of debt to the World Bank and the IMF accounted for 33.1 and 8.8 percent of total public debt, respectively. Liberia’s domestic debt is all held by residents with the CBL the largest among them, holding 24.0 percent of total public debt. At the same time most of the domestic debt is denominated in U.S. dollars, reflecting Liberia’s high degree of dollarization, and pointing towards higher vulnerabilities due to foreign exchange exposures. Total debt service in 2023 reached US$254.4 million of which about 30 percent is external. With the recent expansion of domestic debt, the share of domestic debt service in total debt service rose to about 70 percent in 2023. 5 >>> 7. Macroeconomic assumptions are consistent with the projections in the staff report and in line with recent economic developments and the government’s policy commitments . The DSA assumes that the government will return to prudent fiscal policies, by adopting in 2024 revenue measures and a supplementary budget, as well as by pushing its structural reform agenda forward. On this basis, the key macroeconomic parameters are assumed to evolve as follows (Text Table 4): 2022 2023 2024 2025 2026 2027-41 Real GDP Growth Rate Average 2022 DSA 3.7 4.7 5.7 5.7 5.5 5.1 Current 4.8 4.6 5.1 5.8 5.9 5.1 Real GDP Growth Rate per Capita Average 2022 DSA 1.3 2.2 3.2 3.3 3.1 2.9 Current 2.3 2.1 2.6 3.4 3.5 2.9 Current Account Balance Average 2022 DSA -16.0 -15.3 -15.1 -14.9 -14.8 -13.4 Current -19.0 -26.4 -22.6 -22.0 -21.3 -18.9 Growth Rate of Exports of Goods and Services Average 2022 DSA 7.9 3.0 8.1 6.5 5.6 5.6 Current 13.0 8.6 19.5 9.6 6.7 5.9 Inflation Average 2022 DSA 7.8 8.7 5.2 5.0 5.0 5.0 Current 9.2 10.0 6.6 5.7 5.0 4.7 Primary Fiscal Balance Average 2022 DSA -4.0 -2.4 -2.6 -2.8 -2.8 -2.2 Current -4.4 -6.1 -1.5 -2.4 -1.2 -1.4 Sources: Liberian authorities; and IMF staff projections. 1. A recent large wave of investment in mining sector is projected to triple production and exports of iron ore in the next decade. • Recent and medium-term real GDP growth remains quite strong. Following a strong recovery with real GDP growth of 5 percent in 2021, economic activity further expanded by 4.8 and 4.6 percent in 2022 and 2023, respectively, reflecting a thriving gold sector, fiscal expansion, and a boost to domestic production from improved electricity supply. In 2024, the economy is expected pick up to 5.1 percent, largely supported by strong growth in mining activities and a recovery in the agriculture sector. Projections for the medium-term growth rates have increased somewhat from the last DSA. This reflects a significant iron ore mining investment project led by established foreign-owned companies. One such company plans to invest an amount equivalent to over a quarter of the country’s GDP over a period 2023-26, aiming to increase production fivefold and transform its mine into one of the largest in Sub-Saharan Africa. The project includes the construction of a high-grade iron ore processing plant and significant infrastructure development, such as road expansion and upgrades to existing railway and port facilities. Additionally, the economic outlook relies on continued growth in the gold sector, more substantial infrastructure investment from development partners —including a major investment in electricity generation—and accelerated reforms in the state electricity company. To account for potential delays in implementation, the projections take a conservative approach in 6 >>> factoring these developments into the growth outlook, as well as prospects for exports and fiscal revenues. • Long term real GDP growth (2027-41) is projected at 5.1 percent. IMF staff analysis indicates that Liberia’s potential growth is closer to 5.5 percent.9 Growth will be driven by rapid expansion in the labor force, the continued accumulation of physical capital, and productivity gains, which the new government’s reform agenda targets and the IMF’s and the World Bank’s engagements support. The new government’s growth agenda emphasizes the vital role of education in shaping Liberia’ s long- term development. Development partners are expected to continue supporting the authorities in education and health projects to strengthen the country’s human capital and overall outcomes. The stock of capital is growing from a low base, so investment will bring high productivity gains, including in transport, energy, and telecommunication. The new government structural reform agenda and improved macroeconomic management should foster private sector development and further support productivity growth. The large-scale mining and infrastructure projects will support growth well beyond the medium term, especially through private sector development that they should spurn. Failure to raise recently low productivity growth back to the post-civil-war average is the main risk to the growth outlook. This could happen if reforms to raise education levels and hence the quality of the country’s labor force, improve the efficiency of public investment, and strengthen the business environment faltered. Climate-related setbacks are another risk. • The current account (CA) deficit, including grants, has hovered around 18-20 percent of GDP in the last few years but increased sharply in 2023 on the back of election-related expansion, mining investments, and expanding electricity imports. The current account deficit is expected to decline in the near term on the back of expected fiscal adjustment and somewhat improving terms of trade, with, higher electricity imports, 10 a related expansion in production serving domestic markets, and stronger import-intensive mining investments remaining strong headwinds. In the medium-term and beyond, the current account will be supported by gradually expanded production and export capacity once investment activities come to fruition. However, the expansion of mining exports will ultimately be counterbalanced by an unfavorable long-term trend of the terms of trade and depleting resources in some sectors. The external sector assessment finds that Liberia’s external position is substantially weaker than the level implied by fundamentals and desirable policies. Nonetheless, the CA deficit is expected to remain financed by foreign direct investment (FDI) flows and declining project grants, as well as concessional loans provided by IFIs and bilateral donors . • In 2022-23, exports of goods and services were significantly stronger than projected in the last DSA because of higher prices and expanded production of some exported commodities, such as 9 See Selected Issues Paper “Liberia’s Growth Potential and How to Get There.” 10 In the short to medium term, Liberia is expected to continue supplementing its domestic electricity supply with imports to enhance reliability and meet rising demand. However, over time, reforms within the state electricity company, coupled with investments in domestic power generation, are anticipated to bolster local supply, gradually reducing reliance on imports. Currently, the World Bank is assisting authorities in implementing reforms in distribution companies to minimize technical and commercial losses and expand overall access. Simultaneously, the Bank is also supporting efforts in electricity generation and solarization projects. 7 >>> gold. Upcoming waves of investment in the mining sector explain more favorable prospects for export growth. Imports of goods and services in 2022 remained close to 55 percent of GDP, as in the last DSA, though increased sharply in 2023, driven by electricity imports, mining investment, and fiscal expansion, and are expected to remain elevated in the medium-term corresponding to the upcoming investment plans. • Inflation increased marginally from 9.2 percent in 2022 to 10.0 percent in end-2023, due to exchange rate depreciation and higher import goods prices. After slowing down to 6.2 percent in mid-2024, inflation is projected to converge to 4.8 percent in 2028-29. • The fiscal balance of the government , excluding off-budget operations (Table 4d of the staff report), substantially deteriorated in 2022 and 2023 from a balanced position in 2021 to 5.1 percent of GDP deficit in 2023, going beyond what was foreseen in the IMF-supported program. The reasons were largely due to revenue shortfalls (declined from 16.4 percent of GDP in 2021 to 13.4 percent of GDP in 2023), notably on international trade (1.7 percent of GDP reduction), and faltering spending discipline. For instance, goods and services reached 7.1 percent of GDP in 2023 from 5.4 percent of GDP in 2021. This fiscal deficit was financed by rolling over commercial banks financing and CBL budgetary financing (US$83 million), in addition to the WB budget support and SDR drawdown. Because of financing constraints, the fiscal position needs to improve substantially already in 2024, and more gradually over the medium term. This will be achieved by sharply reducing unproductive spending (e.g. goods and services) by 4 percentage points already in 2024. In subsequent years (2025-27), this expenditure reduction will be followed by a reasonable revenue mobilization, to be achieved by adopting VAT, streamlining the large tax expenditures, and adopting a comprehensive taxation framework to negotiate both expiring natural resource concessions or new ones. 11 The objective is to bring the revenue ratio to GDP back to 16.4 percent of GDP by 2027. This will allow the authorities to reach a primary surplus of 0.7 percent of GDP already in 2024 with a gradual increase to 2.5 percent of GDP by 2027, which is needed to stabilize debt ratios. Preliminary data till end-August 2024 indicates that budget outturn so far is in line with the 2024 supplementary budget and program objectives. Total revenues are on target and recurrent expenditures (e.g. subsidies and grants) are running at a slower pace than what is envisaged in the supplementary budget. • The fiscal balance, including off-budget operations (Table 4b of the staff report), largely IFIs loans executed outside the national budget, follows a similar trend.12 However, there are some differences linked to the external loans provided by IFIs and bilateral donors, which translates in 11 To support the fiscal efforts, the three prior actions under fiscal resilience pillar of the World Bank Development Policy Financing for Liberia focus on enhancing DRM, improving expenditure management and bringing transparency in public procurements. PA1 aims to enhance DRM by implementing regulations for the VAT Act. PA2 seeks to improve efficiency and transparency in PFM by mandating the utilization of critical modules within the IFMIS. Lastly, PA3 targets enhancing transparency and accountability in public procurement by submitting an amendment to the Public Procurement and Concessions Act, requiring the use of the electronic Government Procurement (e-GP) system. 12 The budget, including off-budget operations, covers both national budget operations plus operations stemming from external grants and loans provided by IFIs and bilateral donors which are not channeled through the national budget (e.g. budget support). 8 >>> additional capital spending (beyond the on-budget capital spending) and goods and services. On the basis of Table 3b of the staff report, the revenues will follow exactly the same trend described above for table 3d; namely increasing from 13.4 in 2023 to 16.4 in 2027. External grants are expected to gradually decline, as some IFIs have already indicated to replace them with concessional loans. The recurrent expenditures are also expected to decline by 4.4 percent points, driven by on-budget goods and services (4 percentage points) and wages (0.7 percent of GDP), only partially compensated by slight increase in subsidies and grants (0.3 percent of GDP). Capital spending is expected to gradually decline in 2024 (0.4 percent of GDP), only due to a projected reduced external loan disbursements compared to 2023, while gradually increasing over the medium-term, by reaching 7.5 percent of GDP, on average. Against this background, the primary deficit is expected to substantially improve from 6.1 in 2023 to 1.5 percent of GDP in 2024 and remaining close to an average 1.5/1 percent of GDP until 2029 and beyond, so that public debt ratios stabilize at prudent levels. • In end-2021, the IMF’s general SDR allocation almost doubled Liberia’s hitherto feeble gross official reserves to US$701 million, or the equivalent of 3.9 months of imports. The reserve cover has since declined to 2.1 months of imports at end-2023, reflecting CBL FX lending to government, revaluation losses due to US$ strengthening against the SDR (the largest share of Liberia GIR), budgetary use of SDR, and the growth of imports. The authorities are committed to gradually rebuilding reserves to around 3.5 months of imports in the medium run to be able to withstand external shocks. 8. The assumptions for the financing mix and borrowing terms are as follows : • External borrowing. Liberia relies mostly on external borrowing to satisfy its public gross financing needs in the medium term. US$1,345 million in new external borrowing is projected for 2024-28, corresponding to around four-fifth of total new borrowing. Over the medium and long term, concessional financing from multilateral donors is expected to decline substantially, necessitating recourse to external financing on non-concessional terms to avoid a falloff in investment that in turn would undermine growth performance13. Consequently, the grant element of new external borrowing is expected to decline from 43.1 percent at its peak in 2025 to 20.3 percent in 2044. 13 The IDA disbursement projections take into account the Bank’s Development Policy Financing operations . 9 >>> 2024 2025 2026 2027 2028 Total 222 297 279 309 293 Multilateral 187 277 249 271 241 IMF 51 51 51 52 0 IDA 87 181 153 173 186 AfDB 29 24 25 25 26 Other multilaterals 20 20 20 20 29 Bilateral 0 0 0 0 0 of which: Paris Club 0 0 0 0 0 of which: Non Paris Club 0 0 0 0 0 Commercial 34 20 30 38 52 Sources: Liberian authorities; and IMF staff projections . • Domestic borrowing. During 2024-28, new domestic borrowing is projected around 2024 2025 2026 US$216 million, accounting for 1 about one-seventh of total new Gross financing needs 228 388 333 borrowing. The mix between Financing sources 228 388 333 external and domestic borrowing is 2 External 222 297 279 expected to gradually shift toward Concessional 147 235 218 domestic borrowing in the medium Budget financing 40 40 40 to long run, as the government Project financing 107 195 178 develops and deepens its Non-concessional 75 67 77 Domestic 15 116 71 domestic debt market and given Other sources -9 -24 -17 that financing provided by development partners is unlikely to 1 Gross financing needs presented in this table are consistent with the keep pace with the expansion of DSA and macro framework for the request for a new ECF the Liberian economy. Domestic arrangement. 2 borrowing is projected in the form All the external borrowings are long-term. Sources: Liberian authorities; and IMF staff projections . of short- and medium-term foreign currency denominated bonds, mainly provided by commercial banks and other non-bank financial institutions. Central bank borrowing is generally prohibited by the CBL Act, except for limited amount under exceptional circumstances (e.g., war, famine, and natural disaster). The domestic financing strategy is also closely aligned with the government’s medium-term debt strategy including efforts to develop domestic financial markets. The development of domestic financial markets through regular issuance of government debt instruments, together with prudent debt management strategy, will also play a key role in providing a stable source of funding for public financing needs. Due to the shorter 10 >>> maturity of these bonds, more frequent roll-overs or further external borrowing would be required. Text Table 6 summarizes the public borrowing plan of Liberia in the short-term. 9. This DSA is further grounded in zero outstanding debt arrears . Since end-2022 the GoL started building up domestic debt arrears and in the first half of 2023 also external debt arrears. At their peak in Q3 of 2023, both domestic and external arrears were widespread, covering multiple institutions and instruments and reaching around 2 and 0.25 percent of GDP, respectively. At the time of publishing this joint Bank-Fund DSA, and in the context of the current request for a four-year arrangement under the ECF, the GoL has cleared all outstanding debt obligations while taking measures to avoid reoccurrence or debt arrears in the future. These past arrears therefore do not have bearing on the debt distress risk assessment in the current DSA. 10. To support Liberia’s growth performance, the current DSA is crucially predicated on safeguarding public capital spending. In the long term, Liberia will face a marked decline in loan commitments by multilateral donors from 2026, which is more pronounced than in the previous DSA. Everything else equal, this would imply large declines in public investment and hence economic growth and development. To avoid this, the current DSA keeps public investment and the overall fiscal balance on average close to the levels projected in the previous DSA (see Text Figure 2). The gaps left by the decline in concessional financing are assumed to be filled for the most part by external commercial financing, which a developing Liberia should gain access to in the longer run. The resulting rising share of non-concessional financing will narrow the margin of economic growth over interest rates on Liberia’s debt, but it will remain decisively positive, exerting a downward trend on debt ratios. 11. A shift away from concessional toward commercial external financing safeguards investment but comes at the expense of higher trajectories of debt in PV terms (see Text Figure 2). • In the current DSA, external debt relative to GDP rises from its end-2023 level of 37 percent (23.91 in PV terms) to around 43 percent (about 29 in PV terms) in the early 2030s, before gradually declining to 33.3 percent (25.1 in PV terms) by 2043. Compared to the previous DSA where external debt in 2023 was projected at 40.3 percent of GDP (23.7 in PV terms), the current lower nominal starting ratio is mostly explained by lower-than-projected external borrowing and capital investment as well as higher nominal GDP due to elevated inflation. However, in PV terms the lower nominal starting point is more than offset by higher effective interest rates and debt service costs than projected in the previous DSA. Thereafter, once public investment recovers, in PV terms, debt accumulation is faster, reflecting a shift from concessional to commercial financing to address Liberia’s large investment and development needs. Furthermore, while undisbursed amounts from IDA19 are disbursed as 50 percent grants and 50 percent IDA regular credits, disbursements under IDA20 are on highly concessional credit terms only. 11 >>> • Like in the previous DSA, the fiscal adjustment path has been calibrated to achieve a gently declining trajectory for the total public debt-to-GDP ratio in PV terms. Unlike external debt, total public debt is starting at higher value in 2023 for both nominal and PV terms, former starting at 58.8 percent of GDP in the current DSA (55.3 previously) and the latter is starting at 45.7 percent of GDP (36.7 previously) due to increase in borrowing and higher debt service costs than projected in the previous DSA. The rise in the PV of domestic debt in 2023 compared to the previous DSA is even more pronounced than for external debt. This reflects a large unanticipated fiscal deterioration in 2022-23, financed by treasury securities issuance to domestic banks, as well as a rise in global interest rates. While in nominal terms public debt is projected to decline gradually to 42 percent in 2043, in PV terms the decline in the debt ratio is less pronounced, crossing the 35-percent-of-GDP threshold for moderate debt distress risk only in 2032 and stabilizing in the long-run just above 33 percent of GDP. Achieving this debt path requires fiscal consolidation that brings the deficit ratio from 5.6 percent of GDP in 2022 (inclusive of project aid) to 2.5 percent of GDP within a decade and stabilizing it thereafter. The shift in the medium- to long-term from concessional to commercial external and domestic debt requires keeping fiscal balances above levels needed to stabilize nominal debt ratios. Sources: Authorities' data; and IMF staff calculations. (*) PV stands for present value. 12. The realism tools suggest that the baseline scenario is credible compared to Liberia’s historical and cross-country experiences (Figure 3). • The CA deficit has been and will remain the main contributor to external debt accumulation while net FDI and to lesser extent real GDP growth will play important mitigating roles (Figure 3). The residual, which has played a mitigating factor in the previous years, includes project grants (recorded in the capital account) and current transfers (remittances) that are not captured by the official statistics. • The unexpected increases in PPG external and public debt in the past five years beyond changes in debt explained by the usual macroeconomic debt-creating forces were about 6.1 and 18.3 percent of GDP, respectively, which are both above the median of the countries using the LIC DSF. Unexpected 12 >>> increases in debt reflect primarily the Ebola epidemic during 2014-15 and the COVID-19 pandemic during 2020-21, followed by a terms-of-trade shock in 2022. The main driver of the unexpected increase in external debt was the current account deficit. However, the recognition of restructured and consolidated government debt to the CBL, captured in the residual, played the biggest role in the increase in public debt. 13. Improvement in the primary balance over the next three years is at the upper end when compared with historical data on LIC adjustment programs (Figure 5) . The second DSF realism tool assesses the realism of the fiscal projection. Figure 5a highlights that the anticipated adjustment in the primary balance of about 4½ percentage points of GDP is at the upper end when compared to other LIC programs though not unprecedented —about 10 percent of the sample have implemented even larger fiscal adjustments. The growth projections for 2024-25 are somewhat higher compared to the growth paths suggested by the fiscal multiplier realism tool. This reflects (i) generally low fiscal multipliers given Liberia’s small domestic production base; (ii) sharply reduced uncertainties and lower risk premia brought about by fiscal discipline; (iii) catalytic role of program commitments vis-à-vis other multilateral as well as bilateral lenders; (iv) idiosyncratic factors, including gradual acceleration in mining activities. For the long term (2028-44), the primary deficit is projected to average 1.2 percent, falling to about half percent of GDP by end of the projection horizon to stabilize the PV of public debt- to-GDP ratio. 14. Liberia’s debt-carrying capacity based on the Composite Indicator (CI) is assessed as weak (Text Tables 7 and 8). The CI captures the impact of different factors through a weighted average over 2018-2027 of the World Bank’s CPIA score, the country’s real GDP growth, remittances, international reserves, and world growth. Liberia’s debt -carrying capacity based on the CI, which is based on the October 2024 WEO and the average CPIA, is assessed as weak. The CI score is 2.51, compared to 2.72 in the previous DSA. In addition, Liberia remains assessed as “weak quality of debt monitoring” in line with the country’s debt -recording capacity, although Liberia is improving debt reporting as per the World Bank debt transparency heatmap. 13 >>> CI Score 10-year average Contribution of Components Coefficients (A) components values (B) components (A*B) = (C) CPIA 0.4 3.0 1.1 46% Real growth rate (in percent) 2.7 4.0 0.1 4% Import coverage of reserves (in percent) 4.1 20.8 0.8 34% Import coverage of reserves^2 (in percent) -4.0 4.3 -0.2 -7% Remittances (in percent) 2.0 9.7 0.2 8% World economic growth (in percent) 13.5 2.9 0.4 16% CI Score 2.51 100% CI rating Weak Classification Classification Classification Final classification based on current based on previous based on two vintage vintage previous vintages Weak Weak Weak Weak 2.51 2.62 2.64 EXTERNAL debt burden APPLICABLE Weak Medium Strong thresholds PV of debt in % of EXTERNAL debt burden Exports 140 180 240 GDP thresholds 30 40 55 Debt service in % of PV of debt in % of Exports 10 15 21 Revenue Exports 140 14 18 23 GDP 30 TOTAL public debt burden Weak Medium Strong Debt service in % of threshold Exports 10 PV of total public debt in Revenue 14 35 55 70 percent of GDP 15. Standard scenarios stress tests and contingent liability tests are conducted and discussed below. The standardized stress tests apply the default settings. The contingent liability stress test is based on the quantification of potential contingent liabilities (including SOE -related risks associated with non-guaranteed SOE debt). In addition, it is tailored to take into account, inter alia, contingent liabilities in the form of outstanding payment obligations to the vendors and other payment arrears that could potentially inflate the public debt stock. 14 >>> 16. Liberia remains at moderate risk of external debt distress in the baseline scenario . Under the baseline scenario, all indicators remain below their corresponding thresholds in the medium to long term (Figure 1) although with considerably narrower margins compared to 2022 DSA. Like in the previous DSA, all four indicators show below-threshold ratios supported by the denominator effect. GDP and exports are projected to grow faster than previously envisaged owing to the expected new investments in the iron ore industry. Table 1 indicates that the debt ratio increases at a slower pace and by less than what the current account, FDI, and economic growth suggest, largely explained by a rise in (negative) residual. This may be due to uneven statistical coverage, the sizable project grants that Liberia receives from donors, as well as remittances that may escape official statistics. Still, PV of debt-to-GDP ratio as well as debt service-to-revenue ratio come close to their respective threshold in the second half of the 10-year assessment period. This is reflective of the assumed shifts in the financing mix away from multilateral concessional financing towards external commercial financing. 17. Standard stress tests show that a deterioration of the macroeconomic outlook might lead the present value (PV) of external debt-to-GDP, PV of debt-to-exports ratio and PV of debt service- to-revenue ratio to breach their thresholds (Table 3). All of the standard stress tests, namely alternative scenarios, a shock to real GDP growth, exports, other capital flows, a combination of all shocks, as well as combined contingent liabilities shock will result in breaching the thresholds of the PV of debt-to-GDP ratio as well as debt service-to-revenue ratio. A shock to exports leads to the PV of debt- to-exports ratio to breach the applicable threshold in the second year of impact. 18. The granularity assessment further suggests that Liberia has limited space to absorb shocks (Figure 4). While all debt burden indicators remain below their respective thresholds, a combined shock would lead to a breach of PV of debt-to-GDP ratio in 2024 as well as the PV of debt service-to- revenue ratio in 2024 that continue well beyond 2033. This suggests that Liberia has limited space to absorb shocks. The outcome of the granularity assessment has qualitatively not changed compared to that of the last DSA though with some divergence in indicators. In particular, though export-related indicators show generally smaller ratios largely because of the better-than-expected nominal GDP and exports in 2022, the upward revision in their projection paths and also due to lower nominal external debt to GDP ratio compared with the last DSA. The debt service-to-revenue ratio is notably higher due to a projected shift towards commercial financing. 19. There are significant risks beyond those captured in the standard stress tests . Liberia is contracting an unusually large amount14 of external debt during 2023-25, from the World Bank, some of it at non-concessional terms. As these loans disburse over time, external debt relative to GDP will rise close to the threshold for high risk in subsequent years. Remaining below it therefore requires much lower contracting going forward. Insufficient fiscal consolidation could seriously undermine the objective to restore and preserve debt sustainability as well as maintain its moderate risk rating on external debt. The limited authorities' implementation capacity and weak institutions represent considerable implementation risks. The 14 Roughly 511 million to be disbursed between 2024-2026 which constitute over 12 percent of 2023 nominal GDP. 15 >>> expected peaceful political and social environment—the next presidential election will be in 2029—will help mitigate such risks. The authorities should coordinate with the development partners, get an overview of projects under consideration, and prioritize appropriately while remaining within the overall envelope. They should also improve their debt carrying capacity —an upgrade to a “medium” classification would loosen thresholds against which indicators are assessed for DSA risk rating purposes. 20. Under the expected fiscal consolidation assumptions, the PV of the public debt to GDP ratio will decline from 45.7 percent in 2023 to under 35 percent in 2033 and remain below the 35 percent threshold for the rest of the projection period (Table 2). The PV of public debt to GDP ratio in 2023, projected at 36.7 percent at the time of the previous DSA, turned out to be notably higher at 45.7 percent due to fiscal overruns in 2022-23 and higher than projected debt service costs. In the baseline, the PV of the public debt-to-GDP ratio crosses the 35 percent DSA benchmark in 2032. Automatic debt dynamics remain favorable throughout the forecasting horizon due to largely concessional debt terms, although counterbalanced by Liberia’s high development needs. On balance, the PV of public debt-to-GDP ratio is projected to stabilize around 34 percent of GDP, below though close to the DSA threshold (Table 2 and Figure 2). The debt-service-to-revenue and grants ratio is expected to decline from 28.9 percent in 2023, to about 20 percent in the medium term. Although no explicit threshold exists for the PV of debt-to-revenue and debt service-to-revenue ratios, further efforts in revenue mobilization and PFM reforms can alleviate borrowing needs and reduce debt service pressure. 21. Under standard sensitivity analysis scenarios, Liberia is rated at a high risk of public debt distress throughout the next decade. Among the bound tests, a real GDP shock generates the largest breach of the benchmark on the PV of debt-to-GDP ratio, which will remain well above the related benchmark. Shocks to the primary balance, exports, other flows, and a combination of shocks will also lead to a deterioration of the PV of the debt-to-GDP ratio and a breach of the threshold throughout the projection horizon (Table 4). Additionally, the contingent liability stress test is estimated to lead to a one- off increase in the PV of public debt-to-GDP ratio to 57 percent in 2025 capturing the combined shock of SOE’s external debt default, PPPs’ distress, and financial market vulnerabilities that are not included in the covered data. 22. There are important risks outside this standard sensitivity analysis. In addition to the risks on external debt contracting discussed above, the medium-term growth projections very much depend on a few large mining projects. Moreover, Liberia’s debt servicing record has recently suffered. The government could again incur payment arrears when financing gets tight and violate public financial management regulations, which requires prioritization of debt service payments. The government should strengthen its public financial management including cash planning to avoid getting cornered by financing difficulties. 16 >>> 23. Liberia is assessed to be at moderate risk of external debt and high risk of overall debt distress. All external debt sustainability indicators remain below their indicative thresholds, leading to a moderate risk of external debt distress. The PV of public debt to GDP ratio exceeds the 35-percent threshold during 2023-32, which entails an assessment of high risk of public debt distress. In 2033, this ratio is projected to fall below its indicative threshold, reinsuring that public debt is sustainable. Beyond 2033, based on this model-based signal Liberia would be assessed as being at moderate risk of debt distress. 24. Despite currently high risk of overall debt distress, public debt is assessed as sustainable . Currently more than 90 percent of external debt is on highly concessional terms and held by multilateral lenders, whereas the bulk of domestic debt is owed to the CBL at favorable terms. Although the share of non-concessional debt is set to edge up, considerably limiting room for maneuver, and the interest rate- to-growth differential to narrow in the longer run, the differential will remain strongly negative, thereby exerting strong downward pressure on debt ratios throughout the forecasting horizon. Together with fiscal consolidation that brings the overall deficit from 7.1 percent of GDP in 2023 to below 3 percent of GDP around 2030, the automatic debt dynamics will ensure a gradual and steady decline in the ratio of the PV of public debt to GDP into moderate risk rating territory starting from 2033. Beyond that, public debt projections are predicated on continued gradual fiscal adjustment path that protects public investment while keeping debt in check in the face of rising debt service costs. In the long run once the financing mix settles, these factors will also stabilize the ratio of public debt service to fiscal revenues. 25. The DSA underscores that restoring a prudent fiscal policy and prioritizing borrowing at concessional terms are crucial for safeguarding debt sustainability and bringing public debt to moderate debt distress risk. To maintain external debt at moderate risk of debt distress and to bring public debt to moderate risk of debt distress by 2033, it is essential to ensure a prudent and conservative approach in contracting both new domestic (commercial bank financing) and external debt. Ensuring transparency and timely disclosure of new debt contracts is essential in monitoring debt developments. Therefore, debt management capacity should be further enhanced, by developing and following a credible and coherent medium-term debt strategy. The annual debt strategy should include a detailed borrowing plan that can reduce the risks associated with timely debt service and overall debt sustainability. 26. The balance of risks to the outlook is tilted to the downside . A sizable drop in nominal GDP (either due to a sharp depreciation of LD or a weaker than anticipated real GDP growth rate) is a significant risk to external borrowing space and the risk rating of external debt. A higher-than-projected global economic slowdown, caused by lower external demand and increased global uncertainties, could have adverse impact on the Liberian economy, primarily through the exports and international donors’ support channels. Deterioration in payment culture and culture of continuous arrears can lead to loss of confidence and tighter financing constraints. To this end, the DSA envisages a rapid return to a more sustainable fiscal position, aimed at reversing the large fiscal expansion in 2022-23 and clearing all outstanding overdue debt obligations. A better fiscal position will play a crucial role in creating the space 17 >>> to mitigate future adverse shocks. Any fiscal slippages in the future could substantially reduce Liberia’s borrowing space. Finally, if major climate risks materialize before adaptation measures are in place, economic activity could faulter. 27. The authorities broadly agreed with this DSA and the ratings for debt distress risks . It accurately reflects the level of Liberia’s current indebtedness and likely developments going forward. They underscore the fact that domestic public debt consisted mainly of legacy obligations to the CBL was an important mitigating factor. Debt owed to the CBL is within Liberia’s public sector and its terms are favorable, with relatively low interest rates and long maturities. The government remains committed to macroeconomic stability and fiscal discipline, which will keep public debt in check. 28. The authorities were wary of the constraints that debt sustainability requirements may place on critical infrastructure investment. Mostly because of the destruction during the long civil wars, Liberia faces large infrastructure gaps that it needs to narrow to achieve its development objectives. At the same time, the authorities are committed to improving the ratings for both external and total public debt from currently high to moderate in the years to come. In order to lessen the trade-offs, the authorities intend to strictly prioritize reliance on concessional external loans and grants for now. They will work with the community of development partners to prioritize projects and space out disbursements optimally. They will also aim to improve their debt carrying capacity, which will require proceeding with ambitious reforms, allowing Liberia to gradually take on more debt without unduly increasing risks. 29. The authorities were hopeful that donor support would drop off less than projected in this DSA in the long run. In the long run, Liberia should have easier access to both external financing at non-concessional terms and domestic financing as capital markets are developing. The government would have to tap them to maintain reasonable levels of public investment. However, were development partners able to maintain concessional financing at higher-than-projected levels for longer, recourse to non-concessional and commercial borrowing could be much lower than currently projected, opening up valuable fiscal space. 18 >>> PV of debt-to GDP ratio PV of debt-to-exports ratio 70 200 180 60 160 50 140 40 120 100 30 80 20 60 40 10 Most extreme shock: Combination 20 Most extreme shock: Exports 0 0 2024 2026 2028 2030 2032 2034 2024 2026 2028 2030 2032 2034 Debt service-to-exports ratio Debt service-to-revenue ratio 14 25 12 20 10 15 8 6 10 4 5 2 Most extreme shock: Exports Most extreme shock: Combination 0 0 2024 2026 2028 2030 2032 2034 2024 2026 2028 2030 2032 2034 Baseline Historical scenario Most extreme shock 1/ Threshold Customization of Default Settings Borrowing assumptions on additional financing needs resulting from the stress tests* Size Interactions Default User defined Shares of marginal debt No No External PPG MLT debt 100% Tailored Stress Terms of marginal debt Combined CL No Avg. nominal interest rate on new borrowing in USD 2.3% 2.3% Natural disaster n.a. n.a. USD Discount rate 5.0% 5.0% Commodity price 2/ n.a. n.a. Avg. maturity (incl. grace period) 30 30 Market financing n.a. n.a. Avg. grace period 7 7 Note: "Yes" indicates any change to the size or interactions of * Note: All the additional financing needs generated by the shocks under the stress tests are the default settings for the stress tests. "n.a." indicates that the assumed to be covered by PPG external MLT debt in the external DSA. Default terms of marginal stress test does not apply. debt are based on baseline 10-year projections. Sources: Country authorities; and staff estimates and projections. 1/ The most extreme stress test is the test that yields the highest ratio in or before 2034. The stress test with a one-off breach is also presented (if any), while the one-off breach is deemed away for mechanical signals. When a stress test with a one-off breach happens to be the most exterme shock even after disregarding the one-off breach, only that stress test (with a one-off breach) would be presented. 2/ The magnitude of shocks used for the commodity price shock stress test are based on the commodity prices outlook prepared by the IMF research department. 19 >>> PV of Debt-to-GDP Ratio 80 70 60 50 40 30 20 Most extreme shock: Growth 10 0 2024 2026 2028 2030 2032 2034 PV of Debt-to-Revenue Ratio Debt Service-to-Revenue Ratio 400 30 350 25 300 20 250 200 15 150 10 100 5 Most extreme shock: Growth 50 Most extreme shock: Growth 0 0 2024 2026 2028 2030 2032 2034 2024 2026 2028 2030 2032 2034 Baseline Most extreme shock 1/ TOTAL public debt benchmark Historical scenario Borrowing assumptions on additional financing needs resulting from the stress Default User defined tests* Shares of marginal debt External PPG medium and long-term 93% 93% Domestic medium and long-term 7% 7% Domestic short-term 0% 0% Terms of marginal debt External MLT debt Avg. nominal interest rate on new borrowing in USD 2.3% 2.3% Avg. maturity (incl. grace period) 30 30 Avg. grace period 7 7 Domestic MLT debt Avg. real interest rate on new borrowing 6.9% 6.9% Avg. maturity (incl. grace period) 3 3 Avg. grace period 2 2 Domestic short-term debt Avg. real interest rate 0.0% 0.0% * Note: The public DSA allows for domestic financing to cover the additional financing needs generated by the shocks under the stress tests in the public DSA. Default terms of marginal debt are based on baseline 10-year projections. Sources: Country authorities; and staff estimates and projections. 1/ The most extreme stress test is the test that yields the highest ratio in or before 2034. The stress test with a one-off breach is also presented (if any), while the one-off breach is deemed away for mechanical signals. When a stress test with a one-off breach happens to be the most exterme shock even after disregarding the one-off breach, only that stress test (with a one-off breach) would be presented. 20 >>> Gross Nominal PPG External Debt Debt-creating flows Unexpected Changes in Debt 1/ (in percent of GDP; DSA vintages) (percent of GDP) (past 5 years, percent of GDP) 100 Current DSA Residual 60 80 Previous DSA proj. 50 70 DSA-2017 Interquartile Price and 50 40 range (25-75) 60 exchange rate 30 50 Real GDP 20 growth 0 Change in 40 10 PPG debt 3/ Nominal 0 30 interest rate -50 -10 20 Median Current -20 10 account + FDI -30 Distribution across LICs 2/ -100 0 Change in -40 5-year 5-year Contribution of unexpected 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 PPG debt 3/ historical projected -50 changes change change Public debt Gross Nominal Public Debt Debt-creating flows Unexpected Changes in Debt 1/ (in percent of GDP; DSA vintages) (percent of GDP) (past 5 years, percent of GDP) Residual 50 Current DSA 35 Interquartile Previous DSA proj. range (25- DSA-2017 80 Other debt 30 75) creating flows 70 25 Real Exchange 60 rate 20 Change in depreciation 0 debt 50 Real GDP 15 40 growth 10 30 Real interest Median rate 5 20 Primary deficit 0 10 -50 Contribution of 0 5-year 5-year -5 Change in debt unexpected Distribution across LICs 2/ 2030 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2031 2032 2033 2034 historical projected changes change change -10 1/ Difference between anticipated and actual contributions on debt ratios. 2/ Distribution across LICs for which LIC DSAs were produced. 3/ Given the relatively low private external debt for average low-income countries, a ppt change in PPG external debt should be largely explained by the drivers of the external debt dynamics equation. 21 >>> PV of debt-to GDP ratio PV of debt-to-exports ratio 35 160 30 140 120 25 100 20 80 15 60 10 40 5 20 0 0 2024 2026 2028 2030 2032 2034 2024 2026 2028 2030 2032 2034 Debt service-to-exports ratio Debt service-to-revenue ratio 12 16 14 10 12 8 10 6 8 6 4 4 2 2 0 0 2024 2026 2028 2030 2032 2034 2024 2026 2028 2030 2032 2034 Threshold Baseline Limited space Some space Substantial space Sources: Country authorities; and staff estimates and projections. 1/ For the PV debt/GDP and PV debt/exports thresholds, x is 20 percent and y is 40 percent. For debt service/Exports and debt service/revenue thresholds, x is 12 percent and y is 35 percent. 22 >>> 3-Year Adjustment in Primary Balance Fiscal Adjustment and Possible Growth Paths 1/ (Percentage points of GDP) 7 6 14 Distribution 1/ 6 5 Projected 3-yr adjustment 5 12 3-year PB adjustment greater In percentage points of GDP 4 4 than 2.5 percentage points of 10 GDP in approx. top quartile 3 3 In percent 2 8 2 1 6 0 1 -1 0 4 -2 -1 2 -3 -4 -2 0 2018 2019 2020 2021 2022 2023 2024 2025 Baseline Multiplier = 0.2 Multiplier = 0.4 1.5 -1.5 0.0 0.5 1.0 2.0 2.5 3.0 3.5 4.0 4.5 5.0 5.5 6.0 6.5 7.0 7.5 8.0 more -4.5 -4.0 -3.5 -3.0 -2.5 -2.0 -1.0 -0.5 Multiplier = 0.6 Multiplier = 0.8 1/ Data cover Fund-supported programs for LICs (excluding emergency financing) approved since 1990. The size 1/ Bars refer to annual projected fiscal adjustment (right-hand side scale) and lines show possible real GDP of 3-year adjustment from program inception is found on the horizontal axis; the percent of sample is found on growth paths under different fiscal multipliers (left-hand side scale). the vertical axis. 23 >>> Actual Projections Average 8/ 2021 2022 2023 2024 2025 2026 2027 2028 2029 2034 2044 Historical Projections External debt (nominal) 1/ 37.2 35.4 37.1 37.5 39.6 40.9 41.9 42.4 42.9 41.6 33.7 29.0 41.6 Definition of external/domestic debt Residency-based of which: public and publicly guaranteed (PPG) 37.2 35.4 37.1 37.5 39.6 40.9 41.9 42.4 42.9 41.6 33.7 29.0 41.6 Is there a material difference between the two Yes criteria? Change in external debt -3.9 -1.8 1.7 0.4 2.1 1.3 1.0 0.5 0.4 -0.6 -1.0 Identified net debt-creating flows 5.0 7.2 13.3 10.9 8.8 8.3 6.9 6.6 7.0 10.6 16.4 13.0 8.4 Non-interest current account deficit 17.4 18.7 26.1 22.3 21.6 20.9 19.1 18.5 16.0 18.2 22.6 22.6 18.5 Deficit in balance of goods and services 24.5 22.3 30.2 24.8 23.5 22.4 19.6 18.2 15.4 17.8 19.5 36.6 18.6 Exports 32.1 32.0 31.5 34.8 35.9 36.1 37.1 37.4 38.0 34.3 31.0 Debt Accumulation Imports 56.7 54.4 61.7 59.5 59.4 58.5 56.7 55.6 53.4 52.1 50.5 9.0 50 Net current transfers (negative = inflow) -12.9 -9.6 -10.0 -8.9 -8.7 -8.4 -8.0 -7.4 -7.1 -6.1 -5.2 -18.3 -7.3 of which: official -5.0 -2.7 -2.7 -2.2 -2.4 -2.3 -2.2 -2.1 -2.0 -1.7 -1.2 8.0 45 Other current account flows (negative = net inflow) 5.8 6.0 5.9 6.4 6.7 6.9 7.5 7.7 7.7 6.5 8.3 4.3 7.2 7.0 40 Net FDI (negative = inflow) -7.3 -7.4 -9.8 -10.0 -11.1 -10.9 -10.2 -9.9 -7.2 -6.6 -5.6 -8.6 -8.5 Endogenous debt dynamics 2/ -5.2 -4.0 -3.0 -1.4 -1.7 -1.8 -2.0 -2.0 -1.8 -1.1 -0.7 35 6.0 Contribution from nominal interest rate 0.3 0.3 0.4 0.4 0.4 0.4 0.3 0.3 0.5 0.8 0.8 30 Contribution from real GDP growth -1.8 -1.6 -1.5 -1.7 -2.1 -2.2 -2.3 -2.3 -2.4 -1.9 -1.5 5.0 25 Contribution from price and exchange rate changes -3.7 -2.8 -1.9 … … … … … … … … 4.0 Residual 3/ -8.9 -9.0 -11.6 -10.5 -6.7 -6.9 -5.9 -6.1 -6.6 -11.2 -17.4 -10.4 -8.0 20 of which: exceptional financing -0.9 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 3.0 15 2.0 10 Sustainability indicators PV of PPG external debt-to-GDP ratio ... ... 23.9 24.6 25.7 26.6 27.2 27.7 28.2 29.4 26.2 1.0 5 PV of PPG external debt-to-exports ratio ... ... 75.9 70.8 71.6 73.5 73.4 74.1 74.3 85.6 84.5 0.0 0 PPG debt service-to-exports ratio 5.0 5.3 5.5 5.1 5.5 5.8 5.9 4.7 4.7 6.0 6.9 2024 2026 2028 2030 2032 2034 PPG debt service-to-revenue ratio 9.9 11.1 13.0 12.3 13.2 13.1 13.4 10.7 10.7 11.9 12.0 Gross external financing need (Million of U.S. dollars) 414.0 515.3 792.4 665.7 625.9 648.2 630.7 639.7 691.8 1256.5 3354.0 Debt Accumulation Grant-equivalent financing (% of GDP) Key macroeconomic assumptions Grant element of new borrowing (% right scale) Real GDP growth (in percent) 5.0 4.8 4.6 5.1 5.8 5.9 6.0 6.0 6.0 4.7 4.6 1.2 5.5 GDP deflator in US dollar terms (change in percent) 10.0 8.1 5.6 3.1 0.4 0.0 0.5 1.6 0.1 1.9 1.9 2.7 1.4 Effective interest rate (percent) 4/ 0.9 1.0 1.1 1.0 1.1 1.1 0.8 0.9 1.4 1.9 2.6 0.9 1.3 External debt (nominal) 1/ Growth of exports of G&S (US dollar terms, in percent) 39.2 13.0 8.6 19.5 9.6 6.7 9.5 8.5 7.8 4.1 5.9 5.1 7.8 of which: Private Growth of imports of G&S (US dollar terms, in percent) 23.6 8.7 25.4 4.5 6.0 4.4 3.2 5.7 1.8 6.5 6.2 3.8 5.3 44 Grant element of new public sector borrowing (in percent) ... ... ... 31.7 43.4 38.9 40.2 40.5 37.1 25.9 20.3 ... 34.0 43 Government revenues (excluding grants, in percent of GDP) 16.4 15.2 13.4 14.3 15.0 15.9 16.4 16.5 16.8 17.2 17.8 14.5 16.4 Aid flows (in Million of US dollars) 5/ 503.2 366.5 445.4 340.3 453.6 441.1 469.7 499.3 479.5 426.6 487.7 42 Grant-equivalent financing (in percent of GDP) 6/ ... ... ... 7.0 8.2 7.6 7.6 7.1 6.7 4.1 2.5 ... 6.1 41 Grant-equivalent financing (in percent of external financing) 6/ ... ... ... 68.7 71.2 70.6 70.1 70.7 72.0 62.6 56.3 ... 67.3 40 Nominal GDP (Million of US dollars) 3,509 3,974 4,390 4,756 5,051 5,351 5,702 6,140 6,512 9,161 17,488 Nominal dollar GDP growth 15.5 13.3 10.5 8.3 6.2 5.9 6.6 7.7 6.1 6.7 6.6 3.9 6.9 39 38 Memorandum items: 37 PV of external debt 7/ ... ... 23.9 24.6 25.7 26.6 27.2 27.7 28.2 29.4 26.2 In percent of exports ... ... 75.9 70.8 71.6 73.5 73.4 74.1 74.3 85.6 84.5 36 Total external debt service-to-exports ratio 5.0 5.3 5.5 5.1 5.5 5.8 5.9 4.7 4.7 6.0 6.9 35 PV of PPG external debt (in Million of US dollars) 1050.0 1170.2 1296.9 1421.1 1552.1 1702.1 1838.2 2693.1 4578.6 34 (PVt-PVt-1)/GDPt-1 (in percent) 2.7 2.7 2.5 2.4 2.6 2.2 1.9 1.1 2024 2026 2028 2030 2032 2034 Non-interest current account deficit that stabilizes debt ratio 21.3 20.5 24.4 21.9 19.4 19.6 18.1 18.0 15.6 18.8 23.6 Sources: Country authorities; and staff estimates and projections. 0 1/ Includes both public and private sector external debt. 2/ Derived as [r - g - ρ(1+g) + Ɛα (1+r)]/(1+g+ρ+gρ) times previous period debt ratio, with r = nominal interest rate; g = real GDP growth rate, ρ = growth rate of GDP deflator in U.S. dollar terms, Ɛ=nominal appreciation of the local currency, and α= share of local currency-denominated external debt in total external debt. 3/ Includes exceptional financing (i.e., changes in arrears and debt relief); changes in gross foreign assets; and valuation adjustments. For projections also includes contribution from price and exchange rate changes. 4/ Current-year interest payments divided by previous period debt stock. 5/ Defined as grants, concessional loans, and debt relief. 6/ Grant-equivalent financing includes grants provided directly to the government and through new borrowing (difference between the face value and the PV of new debt). 7/ Assumes that PV of private sector debt is equivalent to its face value. 8/ Historical averages are generally derived over the past 10 years, subject to data availability, whereas projections averages are over the first year of projection and the next 10 years. 24 >>> Actual Projections Average 6/ 2021 2022 2023 2024 2025 2026 2027 2028 2029 2034 2044 Historical Projections Public sector debt 1/ 53.3 54.3 58.808 57.155 57.907 57.5 56.3 54.0 51.8 47.0 41.2 42.0 52.6 Residency- of which: external debt 37.2 35.4 37.055 37.462 39.565 40.9 41.9 42.4 42.9 41.6 33.7 29.0 41.6 Definition of external/domestic debt based of which: local-currency denominated Change in public sector debt -5.4 1.0 4.5 -1.7 0.8 -0.4 -1.2 -2.3 -2.2 -1.0 -0.7 Is there a material difference Identified debt-creating flows -5.8 -1.4 1.5 -2.1 -1.1 -2.4 -2.9 -2.4 -2.9 -0.6 -1.0 2.3 -1.6 Yes between the two criteria? Primary deficit 1.6 4.4 6.1 1.5 2.4 1.2 1.0 1.2 0.4 1.6 0.64 3.8 1.6 Revenue and grants 27.3 21.6 20.1 19.8 20.6 21.5 21.8 21.6 21.9 20.5 19.9 27.7 21.0 of which: grants 10.9 6.4 6.7 5.5 5.6 5.6 5.4 5.1 5.1 3.3 2.0 Public sector debt 1/ Primary (noninterest) expenditure 28.9 26.0 26.2 21.3 23.0 22.7 22.7 22.9 22.3 22.1 20.5 31.5 22.5 Automatic debt dynamics -7.4 -5.8 -4.6 -3.6 -3.6 -3.6 -3.8 -3.7 -3.3 -2.2 -1.6 of which: local-currency denominated Contribution from interest rate/growth differential -4.8 -5.3 -3.6 -3.6 -3.6 -3.6 -3.8 -3.7 -3.3 -2.2 -1.6 of which: contribution from average real interest rate -2.0 -2.9 -1.3 -0.8 -0.4 -0.4 -0.5 -0.5 -0.2 0.0 0.2 of which: foreign-currency denominated of which: contribution from real GDP growth -2.8 -2.4 -2.4 -2.8 -3.2 -3.2 -3.3 -3.2 -3.0 -2.2 -1.9 70 Contribution from real exchange rate depreciation -2.7 -0.5 -0.9 ... ... ... ... ... ... ... ... 60 Other identified debt-creating flows 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 50 Privatization receipts (negative) 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Recognition of contingent liabilities (e.g., bank recapitalization) 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 40 Debt relief (HIPC and other) 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 30 Other debt creating or reducing flow (please specify) 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 20 Residual 0.4 2.4 3.0 0.4 1.9 2.0 1.7 0.1 0.7 -0.3 0.2 1.5 0.5 10 Sustainability indicators 0 PV of public debt-to-GDP ratio 2/ ... ... 45.7 43.7 42.7 41.9 40.4 38.2 36.1 34.1 33.3 2024 2026 2028 2030 2032 2034 PV of public debt-to-revenue and grants ratio … … 227.4 220.8 207.1 195.1 185.6 176.5 164.9 166.3 167.6 Debt service-to-revenue and grants ratio 3/ 12.6 20.7 28.9 16.7 25.7 23.6 22.9 17.2 18.1 13.1 18.1 Gross financing need 4/ 5.1 8.9 11.9 4.8 7.7 6.2 5.9 4.9 4.3 4.2 4.2 of which: held by residents Key macroeconomic and fiscal assumptions Nominal GDP (local currency) 3,509 3,974 4,390 4,756 5,051 5,351 5,702 6,140 6,512 9,161 17,488 of which: held by non-residents Real GDP growth (in percent) 5.0 4.8 4.6 5.1 5.8 5.9 6.0 6.0 6.0 4.7 4.6 1.2 5.5 Average nominal interest rate on public debt (in percent) 2.1 2.1 2.1 2.2 2.3 2.6 2.0 2.0 2.0 2.2 3.2 70 1.4 2.1 Average nominal interest rate on external debt (in percent) 0.9 1.0 1.1 1.0 1.1 1.1 0.8 0.9 1.4 1.9 2.6 0.9 1.3 60 Average nominal interest rate on domestic debt (in percent) 4.8 4.5 3.9 4.2 4.4 5.7 5.0 5.2 4.6 4.2 6.0 2.9 4.5 Average real interest rate (in percent) -3.5 -5.6 -2.4 -1.4 -0.8 -0.7 -1.0 -0.9 -0.5 -0.1 0.6 -1.6 -0.7 50 Average real interest rate on domestic debt (in percent) -4.7 -3.3 -1.6 1.0 4.1 5.7 4.4 3.5 4.5 2.2 4.0 0.1 3.1 Average real interest rate on external debt (in percent) -3.5 -5.6 -2.4 -1.4 -0.8 -0.7 -1.0 -0.9 -0.5 -0.1 0.6 -1.6 -0.7 40 Exchange rate (LC per US dollar) 1.0 1.0 1.0 1.0 1.0 1.0 1.0 1.0 1.0 1.0 1.0 1.0 1.0 Nominal depreciation of local currency (percentage change in LC per dollar) 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 30 Exchange rate (US dollar per LC) 1.0 1.0 1.0 1.0 1.0 1.0 1.0 1.0 1.0 1.0 1.0 1.0 1.0 20 Nominal appreciation (increase in US dollar value of local currency, in percent) 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Real exchange rate depreciation (in percent, + indicates depreciation) -4.9 -1.0 -1.9 … ... ... ... ... ... ... ... 0.1 ... Inflation rate (GDP deflator, in percent) 10.0 8.1 5.6 3.1 0.4 0.0 0.5 1.6 0.1 1.9 1.9 2.7 1.4 10 US Inflation rate (GDP deflator, in percent) 4.6 7.0 3.6 2.5 1.9 1.8 1.8 1.8 1.8 2.0 2.0 2.6 2.0 Growth of real primary spending (deflated by GDP deflator, in percent) -10.7 -5.8 5.3 -14.3 14.2 4.3 6.3 6.6 3.3 3.0 3.8 0 1.1 4.1 Primary deficit that stabilizes the debt-to-GDP ratio 5/ 7.0 3.4 1.6 3.2 1.7 1.6 2.1 3.6 2.6 2.5 1.4 4.0 2.6 2024 2026 2028 2030 2032 2034 PV of contingent liabilities (not included in public sector debt) 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Sources: Country authorities; and staff estimates and projections. 1/ Coverage of debt: The central government, central bank, government-guaranteed debt . Definition of external debt is Residency-based. 2/ The underlying PV of external debt-to-GDP ratio under the public DSA differs from the external DSA with the size of differences depending on exchange rates projections. 3/ Debt service is defined as the sum of interest and amortization of medium and long-term, and short-term debt. 4/ Gross financing need is defined as the primary deficit plus debt service plus the stock of short-term debt at the end of the last period and other debt creating/reducing flows. 5/ Defined as a primary deficit minus a change in the public debt-to-GDP ratio ((-): a primary surplus), which would stabilizes the debt ratio only in the year in question. 6/ Historical averages are generally derived over the past 10 years, subject to data availability, whereas projections averages are over the first year of projection and the next 10 years. 25 >>> Projections 1/ 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 PV of debt-to GDP ratio Baseline 25 26 27 27 28 28 29 29 29 29 29 A. Alternative Scenarios A1. Key variables at their historical averages in 2024-2034 2/ 25 29 33 37 42 47 52 57 60 63 65 B. Bound Tests B1. Real GDP growth 25 29 34 35 35 36 37 37 38 38 38 B2. Primary balance 25 27 31 31 32 33 33 33 33 33 33 B3. Exports 25 31 41 42 42 42 42 42 42 42 41 B4. Other flows 3/ 25 35 46 46 46 46 46 46 45 45 44 B5. Depreciation 25 32 27 28 29 30 31 31 32 32 32 B6. Combination of B1-B5 25 41 49 50 50 50 50 50 50 50 49 C. Tailored Tests C1. Combined contingent liabilities 25 39 39 40 41 41 41 41 41 41 41 C2. Natural disaster n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. C3. Commodity price n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. C4. Market Financing n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. Threshold 30 30 30 30 30 30 30 30 30 30 30 PV of debt-to-exports ratio Baseline 71 72 74 73 74 74 75 79 81 84 86 A. Alternative Scenarios A1. Key variables at their historical averages in 2024-2034 2/ 71 80 90 101 114 124 136 153 167 179 190 0 71 78 87 92 98 100 103 109 112 114 115 B. Bound Tests B1. Real GDP growth 71 72 74 73 74 74 75 79 81 84 86 B2. Primary balance 71 77 85 85 86 86 86 90 93 95 97 B3. Exports 71 104 159 156 155 154 153 159 163 165 166 B4. Other flows 3/ 71 99 126 123 122 120 119 123 126 127 127 B5. Depreciation 71 72 60 60 62 62 64 67 70 72 75 B6. Combination of B1-B5 71 111 107 130 129 128 128 133 136 137 138 C. Tailored Tests C1. Combined contingent liabilities 71 107 109 107 109 108 107 111 114 116 118 C2. Natural disaster n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. C3. Commodity price n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. C4. Market Financing n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. Threshold 140 140 140 140 140 140 140 140 140 140 140 Debt service-to-exports ratio Baseline 5 6 6 6 5 5 5 5 5 6 6 A. Alternative Scenarios A1. Key variables at their historical averages in 2024-2034 2/ 5 6 6 7 6 6 7 7 8 10 11 0 5 5 6 7 6 6 6 6 7 8 9 B. Bound Tests B1. Real GDP growth 5 6 6 6 5 5 5 5 5 6 6 B2. Primary balance 5 6 6 6 5 5 5 5 6 6 7 B3. Exports 5 7 9 10 8 8 8 8 9 10 12 B4. Other flows 3/ 5 6 7 7 6 6 6 6 7 8 9 B5. Depreciation 5 6 6 5 4 4 4 4 5 5 5 B6. Combination of B1-B5 5 6 8 9 7 7 7 7 7 9 10 C. Tailored Tests C1. Combined contingent liabilities 5 6 7 7 6 6 6 6 6 7 7 C2. Natural disaster n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. C3. Commodity price n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. C4. Market Financing n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. Threshold 10 10 10 10 10 10 10 10 10 10 10 Debt service-to-revenue ratio Baseline 12 13 13 13 11 11 11 10 11 12 12 A. Alternative Scenarios A1. Key variables at their historical averages in 2024-2034 2/ 12 14 14 15 13 14 15 16 18 20 21 0 12 13 14 15 13 14 14 14 15 17 17 B. Bound Tests B1. Real GDP growth 12 15 17 17 14 14 14 13 14 15 15 B2. Primary balance 12 13 13 14 11 12 12 11 12 13 13 B3. Exports 12 14 15 17 14 14 14 13 14 15 17 B4. Other flows 3/ 12 13 15 17 14 14 14 13 14 17 18 B5. Depreciation 12 17 17 16 12 13 13 12 13 14 13 B6. Combination of B1-B5 12 15 19 20 16 16 16 15 16 20 20 C. Tailored Tests C1. Combined contingent liabilities 12 13 16 16 13 13 13 12 13 14 14 C2. Natural disaster n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. C3. Commodity price n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. C4. Market Financing n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. Threshold 14 14 14 14 14 14 14 14 14 14 14 Sources: Country authorities; and staff estimates and projections. 1/ A bold value indicates a breach of the threshold. 2/ Variables include real GDP growth, GDP deflator (in U.S. dollar terms), non-interest current account in percent of GDP, and non-debt creating flows. 3/ Includes official and private transfers and FDI. 26 >>> Projections 1/ 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 PV of Debt-to-GDP Ratio Baseline 44 43 42 40 38 36 35 35 35 34 34 A. Alternative Scenarios A1. Key variables at their historical averages in 2024-2034 2/ 44 45 48 50 51 52 54 56 58 60 61 0 #N/A #N/A #N/A #N/A #N/A #N/A #N/A #N/A #N/A #N/A #N/A B. Bound Tests B1. Real GDP growth 44 50 60 62 63 63 65 68 70 72 74 B2. Primary balance 44 45 48 47 45 43 42 42 41 41 40 B3. Exports 44 47 54 53 50 48 46 46 45 45 43 B4. Other flows 3/ 44 52 61 59 56 54 52 52 51 50 48 B5. Depreciation 44 48 46 43 39 36 34 33 32 31 29 B6. Combination of B1-B5 44 46 50 47 45 43 42 42 42 41 41 C. Tailored Tests C1. Combined contingent liabilities 44 58 57 56 53 51 50 50 49 48 48 C2. Natural disaster n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. C3. Commodity price n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. C4. Market Financing n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. TOTAL public debt benchmark 35 35 35 35 35 35 35 35 35 35 35 PV of Debt-to-Revenue Ratio Baseline 221 207 195 186 177 165 170 169 168 168 166 A. Alternative Scenarios A1. Key variables at their historical averages in 2024-2034 2/ 221 218 219 224 230 231 250 259 267 276 285 0 17 24 22 22 16 17 13 12 12 11 11 B. Bound Tests B1. Real GDP growth 221 236 260 266 271 271 297 310 322 335 347 B2. Primary balance 221 219 223 215 208 196 202 201 199 198 196 B3. Exports 221 229 253 241 231 217 223 221 218 216 212 B4. Other flows 3/ 221 254 284 271 259 245 251 249 245 242 235 B5. Depreciation 221 236 217 201 186 170 168 162 155 150 145 B6. Combination of B1-B5 221 222 227 211 204 193 201 200 199 199 197 C. Tailored Tests C1. Combined contingent liabilities 221 280 267 258 247 234 241 239 236 234 232 C2. Natural disaster n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. C3. Commodity price n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. C4. Market Financing n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. Debt Service-to-Revenue Ratio Baseline 17 26 24 23 17 18 15 13 13 13 13 A. Alternative Scenarios A1. Key variables at their historical averages in 2024-2034 2/ 17 26 24 25 19 21 18 17 17 18 19 0 17 24 22 22 16 17 13 12 12 11 11 B. Bound Tests B1. Real GDP growth 17 28 28 28 23 25 21 20 20 21 22 B2. Primary balance 17 26 24 24 19 20 15 14 14 14 15 B3. Exports 17 26 24 25 19 20 16 15 14 15 17 B4. Other flows 3/ 17 26 25 26 20 21 17 15 15 17 19 B5. Depreciation 17 26 26 25 19 20 17 15 15 15 15 B6. Combination of B1-B5 17 26 25 24 18 19 16 14 14 15 15 C. Tailored Tests C1. Combined contingent liabilities 17 26 26 25 26 20 17 15 15 15 15 C2. Natural disaster n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. C3. Commodity price n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. C4. Market Financing n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. Sources: Country authorities; and staff estimates and projections. 1/ A bold value indicates a breach of the benchmark. 2/ Variables include real GDP growth, GDP deflator and primary deficit in percent of GDP. 3/ Includes official and private transfers and FDI. 27 >>>