Among the debt challenges facing low-income countries, strengthening the transparency of sovereign debt stands out as one where concrete and meaningful progress is within reach. Success will require practical technical solutions and full cooperation from creditors as well.
WASHINGTON, DC – From the COVID-19 pandemic to advanced-economy interest-rate hikes, developments over the last few years have left many developing economies struggling to repay their debts. But the problem might be even bigger than the world realizes, as many sovereign debts are hidden, undisclosed, or opaque. This prevents policymakers and investors from making informed decisions.
Some low-income countries have made progress on disclosing their debts: the latest Debt Reporting Heat Map shows a rise in disclosure from 60% in 2021 to 80% today. But some countries have regressed, and significant gaps and weaknesses remain. For example, information might not be released swiftly enough or in adequate detail, and countries might disclose only central-government debts, leaving out other public and publicly guaranteed liabilities.
Consider domestic debts: many low-income countries, shut out of financial markets, have resorted to issuing such debt to meet their financing needs – often without reporting these instruments. Similarly, opaque currency-swap lines are being used to prop up heavily indebted borrowers. The World Bank’s 2021 comprehensive report on public-debt transparency in low-income countries anticipated both of these trends.
WASHINGTON, DC – From the COVID-19 pandemic to advanced-economy interest-rate hikes, developments over the last few years have left many developing economies struggling to repay their debts. But the problem might be even bigger than the world realizes, as many sovereign debts are hidden, undisclosed, or opaque. This prevents policymakers and investors from making informed decisions.
Some low-income countries have made progress on disclosing their debts: the latest Debt Reporting Heat Map shows a rise in disclosure from 60% in 2021 to 80% today. But some countries have regressed, and significant gaps and weaknesses remain. For example, information might not be released swiftly enough or in adequate detail, and countries might disclose only central-government debts, leaving out other public and publicly guaranteed liabilities.
Consider domestic debts: many low-income countries, shut out of financial markets, have resorted to issuing such debt to meet their financing needs – often without reporting these instruments. Similarly, opaque currency-swap lines are being used to prop up heavily indebted borrowers. The World Bank’s 2021 comprehensive report on public-debt transparency in low-income countries anticipated both of these trends.