May 14, 2025
A recent conference addressed the critical need for transparency in public debt within emerging market and developing economies (EMDEs). The event highlighted the importance of making public debt information accessible to prevent sovereign debt crises. "Transparency, therefore, is not just ideal—it is essential," stated a speaker at the conference.
The International Monetary Fund (IMF) organized this initiative, emphasizing its commitment to turning transparency into a reality for member countries. The IMF's Legal Department was acknowledged for their efforts in organizing the event.
During the conference, it was noted that ensuring public debt transparency is crucial for monitoring vulnerabilities amid historically high public debt levels. Emerging markets are facing significant challenges in accessing capital markets due to high financing costs and new fiscal spending needs. "The stakes are high," remarked one speaker.
Transparency plays a vital role in building credibility and trust during both stable and stressful periods. It helps reduce borrowing costs and fosters accountability. "Debt surprises damage trust, increase the cost of borrowing and increase the severity of crises," according to experts at the conference.
To ensure adequate public debt transparency, stakeholders require timely, accurate, and comprehensive information on public debt stock and flows. However, many EMDEs face challenges such as lender preferences for collateralized debt structures that conceal financial terms through confidentiality agreements.
Addressing these issues requires legal frameworks that discourage opaque borrowing structures and mandate disclosure of financial terms. Stronger governance supported by robust legal frameworks around public financial management is necessary to warrant full disclosure of all public debts.
Furthermore, gaps in governance, reporting, institutional policies contribute to inadequate transparency in some countries. A broad-based approach starting from legal frameworks can address these deficiencies.
The IMF has been actively promoting debt transparency through bilateral surveillance, lending programs, and capacity development initiatives. From this year onwards (2025), members are required to report on general government debt stock with detailed composition reporting expected by 2027.
Efforts also include raising standards on debt disclosure under IMF lending programs where gaps exist; enhancing capacity development support focused on improving transparency; publishing medium-term strategies; annual borrowing plans; fiscal risk assessments among others—all aimed at fostering better access to sovereign markets globally.
Concluding remarks emphasized four key messages: "First: Public Debt Transparency helps a Sovereign both in good times & bad... Second: Enhancing Debt Transparency is more critical now... Third: Debt Transparency must be designed not assumed... Fourth: It must be embedded across law institutions & incentives."
Countries were urged towards developing strong governance mechanisms backed by robust legal-institutional frameworks covering central government debts extending further into general government sectors including state-owned enterprises while acknowledging long-term nature required especially given constraints faced by many EMDEs today."