More developing economies are increasingly resorting to off-budget and complex borrowing arrangements due to a tighter financing environment, complicating the assessment of public debt exposures. This is according to a new World Bank report on debt transparency.
The report suggests a fundamental change in how debtor and creditor countries report and disclose debt, recommending broader coverage and deeper, loan-by-loan disclosures.
Titled "Radical Debt Transparency," the report notes that while more low-income countries have started publishing some debt data—rising from below 60% to over 75% since 2020—only 25% provide loan-level information on newly contracted debt. The increase in complex financing arrangements such as private placements, central bank swaps, and collateralized transactions has made reporting more challenging.
"Recent cases of unreported debt have highlighted the vicious cycle that a lack of transparency can set off," said Axel van Trotsenburg, World Bank's Senior Managing Director. "When hidden debt surfaces, financing dries up and terms worsen. Countries turn to opaque, collateralized deals. Radical debt transparency, which makes timely and reliable information accessible, is fundamental to break the cycle."
The report indicates that domestic debt issuance is also rising but with inadequate disclosure standards. Additionally, countries are engaging in "silent" partial and confidential debt restructurings with select creditors, withholding critical information from markets.
To improve transparency practices urgently, the report recommends legal and regulatory reforms mandating transparency in loan contracts and lending terms disclosure. It calls for full participation by creditor countries in comprehensive debt reconciliation processes, regular audits with better national oversight, and public release of restructuring terms once agreements are finalized.
“Debt transparency is not just a technical issue—it’s a strategic public policy that builds trust, reduces borrowing costs, and attracts investment,” stated Pablo Saavedra, World Bank’s Vice President for Prosperity. “Radical debt transparency not only supports debt sustainability but also unlocks private sector investment to drive job creation.”
Central to the World Bank's efforts in promoting debt transparency are its technical assistance program advocating country-specific reforms and the global Debtor Reporting System—the primary source of verifiable data on external debts of low- and middle-income countries. Efforts are ongoing to expand this system to include domestic debts while enhancing data quality.