OECD sustainable lending practices explained

OECD sustainable lending practices are set out in the OECD Recommendation of the Council on Sustainable Lending Practices and Officially Supported Export Credits (OECD/LEGAL/0442). The Recommendation was adopted on 30 May 2018 and revised in 2024. It directs Adherents, when considering official export credit support with a repayment term of one year or more to public obligors or publicly guaranteed obligors in lower income countries, to take IMF and World Bank debt sustainability analyses into account, respect applicable non-concessional borrowing limits, and notify the IMF and World Bank of intended support above defined thresholds.

The instrument sits alongside, but is distinct from, the OECD Arrangement on officially supported export credits. Arrangement disciplines address financial terms and conditions among Participants. The sustainable lending Recommendation addresses the risk that official export credits to the public sector contribute to unsustainable external debt in lower income countries.

Scope of OECD sustainable lending coverage

For the Recommendation, lower income countries are those eligible for financing through the IMF Poverty Reduction and Growth Trust (PRGT) or that only have access to interest-free credit or grants from the World Bank International Development Association (IDA Only countries). Public obligors or publicly guaranteed obligors are those whose repayment obligation is guaranteed by a public entity, including central, regional and local governments and public enterprises whose debt obligations would be assumed by the government in a default. Where a country is subject to a public debt limit under an IMF-supported programme, the technical Memorandum of Understanding or consultation with the IMF and World Bank may be used to determine public-entity status.

Unproductive expenditure is defined as any transaction that is not consistent with a country's poverty reduction and debt sustainability strategies and does not contribute to its social and/or economic development. The Recommendation builds on earlier ECG statements, including the 2001 Statement of Principles on Unproductive Expenditure, the 2007 Statement of Principles on Unproductive Expenditure, and the 2008 and 2016 Principles and Guidelines on sustainable lending to low and lower income countries.

Debt sustainability analysis and borrowing limits

Adherents should take into account the results of the most recent IMF/World Bank country-specific debt sustainability analyses conducted within the joint Debt Sustainability Framework, and review relevant programme or policy documents for each transaction under consideration. For countries subject to debt limit conditionality for non-concessional borrowing under the IMF Debt Limits Policy (DLP) or the World Bank's corresponding debt limits policy, Adherents should also take into account the prevailing limits on public sector non-concessional borrowing.

Where a country is subject to a zero limit on non-concessional borrowing, Adherents should not provide support for official export credit transactions involving public obligors or publicly guaranteed obligors. The Recommendation recognises that, in rare circumstances, countries may be moved from a zero to a non-zero limit under IMF and World Bank policies after consultations and subsequent management or board approvals.

Where a country is subject to a non-zero limit, and the credit value exceeds SDR 5 million (or SDR 1 million for very small countries with national income levels of less than USD 1 billion), Adherents should seek assurances, on a best effort basis, from the appropriate government authorities in the debtor country that the project or expenditure is in accordance with the applicable debt limits policy. Participation of the Ministry of Finance or central bank as obligor or guarantor is stated as sufficient evidence that this assurance obligation has been met. The 2024 revision updated the Recommendation's reference to the World Bank debt limits policy to reflect the name change from Non-Concessional Borrowing Policy (NCBP) to Sustainable Development Finance Policy (SDFP).

Notification to the IMF and World Bank

Before a decision to provide support is finalised, Adherents should inform the IMF and World Bank, via the LendingtoLICs mailbox, of any intended official export credit transaction involving a public obligor or guarantor in a lower income country subject to debt limits conditionality, where the credit value exceeds the SDR 5 million threshold (or SDR 1 million for very small countries). The notice should provide the detail necessary for the project to be identified and for basic financial terms and conditions to be known. The purpose is to ensure the IMF and World Bank are aware of potential public external debt obligations related to projects to be supported by official export credits before those obligations are contracted.

Adherents should also provide data via the OECD Secretariat to the IMF and World Bank on all supported transactions to lower income countries on an annual basis. That reporting supports assessment of whether official export credits to those countries are not provided for unproductive purposes and are consistent with the aims of the Debt Sustainability Framework.

Interaction with export credit agency practice

For an export credit agency desk, the Recommendation is a governance filter on public-sector support in covered lower income markets. It does not replace underwriting of buyer credit risk, export credit guarantee structuring, or Arrangement term limits. A buyer credit or other officially supported facility to a public obligor in a covered country still requires a file that can show DSA consideration, limit compliance where applicable, and timely notification where thresholds are met.

The Recommendation is not legally binding in the sense of an OECD Decision. It is a Council Recommendation: a political commitment with an expectation that Adherents will do their best to implement it. The Working Party on Export Credits and Credit Guarantees monitors implementation and reports to Council. A 2024 implementation report concluded that the Recommendation had proven relevant and had been successfully implemented by Adherents, while identifying practical challenges, including cases where transactions that should have been notified were not. The next reporting to Council is scheduled for 2029.

OECD sustainable lending therefore operates as a shared standard among Adherents for official export credit support to public-sector counterparties in lower income countries, anchored in IMF and World Bank debt analytics and debt limit policies rather than in Arrangement pricing or tenor rules alone.