Transition Finance Toolkit

The various dimensions of transition

The mix of financial resources accessible to developing countries varies over time. It depends on several, varying factors such as income levels, eligibility to specific financing instruments or support measures.

The transition finance fact sheets outline the key transition criteria and implications:

• Changes in income levels
  • LIC
    to LMIC
  • LMIC
    to UMIC
  • UMIC
    to HIC
• Eligibility to specific financing instruments or support measures
  • IDA
    graduation
  • IBRD
    graduation
  • LDC
    graduation

 
Countries’ access to finance can also be influenced by exogenous shocks and specific vulnerabilities, including natural disasters, commodity price shocks or humanitarian crises. For more information, consult the transition finance country studies.

How can donors respond to transition challenges and optimise access to finance?

Transition presents both opportunities and challenges for developing countries and partners. As income per capita increases, countries progressively lose access to concessional finance. This enhances the risk of financing gaps in critical sectors such as health or education. With rising income per capita, however, countries may simultaneously increase their capacity to collect domestic resources and attract private investment.

The transition finance toolkit helps development partners and recipients better understand, anticipate and respond to the financing challenges faced by countries at each stage of their development. It also aims to optimise their access to financing in order to reap the full potential of the emerging opportunities.