World Bank seeks more transparency in debt practices

WASHINGTON: The World Bank said on Thursday it is worried that some countries are becoming less transparent about their public debt and are using complex borrowing tools, making it harder to measure how much they owe.
To remedy this, the bank called for a fundamental change in the way debtor and creditor countries report and disclose debt.
The concerns focus particularly on low-income countries that are increasingly turning to borrowing arrangements the bank considers opaque.
These include private placements – a kind of funding round done not publicly but privately – central bank swaps, and collateralised transactions, the bank said in a report on debt transparency.
The proportion of low-income countries publishing some debt data has grown from below 60 per cent to more than 75 per cent since 2020. But only 25 per cent disclose loan-level information on new debt, the report stated.
And countries are now turning to local investors as they take on debt but are not publishing figures on these loans.
"Recent cases of unreported debt have highlighted the vicious cycle that a lack of transparency can set off," said the World Bank's Senior Managing Director, Axel van Trotsenburg.
In Senegal, for instance, an independent administrative court that serves as an auditor said in February that government debt in that African nation had risen to 99.67 per cent of GDP – a rate one-quarter higher than what had been announced by the previous government.
An IMF team that visited Senegal in March said officials had made false statements regarding budget deficits and public debt for the period 2019–2023.
Other countries negotiated secretly to restructure their debt with some of their creditors, the World Bank said.
"Debt transparency is not just a technical issue – it's a strategic public policy that builds trust, reduces borrowing costs, and attracts investment," said Pablo Saavedra, a World Bank vice-president.
The bank called on countries to carry out reforms to improve their transparency practices.
"These include legal and regulatory reforms mandating transparency in loan contracts and disclosure of lending terms, full participation by creditor countries in comprehensive debt reconciliation processes, more regular audits and better national oversight, and the public release of debt restructuring terms once agreements are finalised," the bank's statement said.

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