Incorporating Adaptation and Resilience into Macroeconomic Assessments

Abstract

Climate and nature have become a major source of shocks and potential debt stress for developing countries. Disasters destroy infrastructure and reduce revenue. Degraded ecosystems, like mangroves, coral reefs, and soil, make those losses larger – pushing up debt burdens and borrowing costs at the moment countries most need fiscal space to invest in resilience.

Good borrowing, lending and policy decisions depend on finance ministries, debt management offices, the IMF and the World Bank understanding these risks and interventions and agreeing on how to measure them.

The IMF-World Bank Debt Sustainability Analysis (DSA) is a critical tool for building that shared understanding. As a central pillar of the international financial architecture, the DSA shapes how risk is defined, priced, and managed across the entire system – informing concessional borrowing limits, debt restructuring, costs of capital, and fiscal policy advice.

As the framework becomes operational, this policy brief outlines key recommendations for the IMF and World Bank's DSA.