Over the past 15 years, 35 low-income countries have transitioned to middle-income country status. This progress reflects the strong and sustained economic growth achieved in most parts of the developing world. While income per capita only partly reflects the overall economic and social development of a country, the move to middle-income country status can significantly affect the mix of financing resources available to it and often triggers donor discussion on whether to reduce or even phase out financial assistance. 

Against this background, very surprisingly, we have little evidence and very few systematic cross-country comparative reviews of how volumes of development finance and terms and conditions evolve during the transition from low-income status for specific economies. 

This report is the first to look systematically at the impact on development financing of countries’ transition from low- to middle-income status. 

A companion paper reviews development partners’ approaches to transition and exit from bilateral programmes.