The World Bank has published a report emphasizing the need for nations to overhaul their debt disclosure practices in light of the increasing complexities of the modern financing landscape.
The Radical Debt Transparency report reveals that new financial instruments, such as private placements, central bank swaps, and collateralized transactions, have made the reporting of debt more intricate. While the share of low-income countries disclosing debt information has risen from below 60% to over 75% since 2020, only a quarter of these nations have provided detailed loan-level data on recently contracted debt.
Additionally, the report highlights a surge in domestically issued debt; however, the accuracy of such disclosures remains questionable. Countries are also entering into confidential debt restructurings with specific creditors, limiting access to critical information.
Axel van Trotsenburg, Senior Managing Director at the World Bank, remarked: “Recent instances of hidden debt underscore the damaging cycle that a lack of transparency can initiate. When undisclosed debts emerge, financing options diminish, leading to more unfavorable terms. Nations often resort to opaque, collateralized arrangements. Achieving radical debt transparency, where timely and accurate information is readily available, is essential to break this cycle.”
The report calls on both debtor and creditor nations to enhance their transparency practices, advocating for mandates that promote clarity in loan contracts and lending terms. It also recommends more regular audits, improved national oversight, public disclosure of debt restructuring conditions, and comprehensive participation from creditors in debt reconciliation efforts.
To support these initiatives, the World Bank is working on expanding its global Debtor Reporting System to ensure the sharing and utilization of high-quality data.
Pablo Saavedra, Vice President for Prosperity at the World Bank, stated: “Debt transparency transcends mere technicality; it is a strategic public policy that fosters trust, lowers borrowing costs, and attracts investment. By embracing radical debt transparency, we not only promote debt sustainability but also unlock private sector investments essential for job creation.”