World Bank calls for "radical" restructuring of national debt reporting in new report
The World Bank released a report outlining how countries should redefine how they disclose debt due to more complexity in the current financing environment.
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This content has been selected, created and edited by the Finextra editorial team based upon its relevance and interest to our community.
The Radical Debt Transparency report found that private placements, central bank swaps, and collaterised transactions have complicated the reporting process. As a result, while the proportion of low-income countries publishing debt data has increased from under 60% to over 75% since 2020, only 25% have reported loan-level data on newly contracted debt.
The report also found that domestically-issued debt is on the rise, but disclosures are not accurate. Furthermore, countries are also using confident debt restructurings with certain creditors which withholds essential data.
World Bank's senior managing director Axel van Trotsenburg stated: 'Recent cases of unreported debt have highlighted the vicious cycle that a lack of transparency can set off. 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 urges debtor and creditor countries to reform their transparency practices and issue mandates to ensure transparency in loan contracts and disclosures of lending terms. The report also suggests that there should be more frequent audits and better national oversight, published debt restructuring terms, and full participation from creditors in debt reconciliation processes.
The World Bank is currently working to expand their global Debtor Reporting System to ensure that quality data is being shared and utilised.
Pablo Saavedra, the World Bank's vice president for prosperity, commented: 'Debt transparency is not just a technical issue—it's a strategic public policy that that builds trust, reduces borrowing costs, and attracts investment. Radical debt transparency not only supports debt sustainability but also unlocks private sector investment to drive job creation.'
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World Bank calls for "radical" restructuring of national debt reporting in new report
The World Bank released a report outlining how countries should redefine how they disclose debt due to more complexity in the current financing environment. 0 This content has been selected, created and edited by the Finextra editorial team based upon its relevance and interest to our community. The Radical Debt Transparency report found that private placements, central bank swaps, and collaterised transactions have complicated the reporting process. As a result, while the proportion of low-income countries publishing debt data has increased from under 60% to over 75% since 2020, only 25% have reported loan-level data on newly contracted debt. The report also found that domestically-issued debt is on the rise, but disclosures are not accurate. Furthermore, countries are also using confident debt restructurings with certain creditors which withholds essential data. World Bank's senior managing director Axel van Trotsenburg stated: 'Recent cases of unreported debt have highlighted the vicious cycle that a lack of transparency can set off. 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 urges debtor and creditor countries to reform their transparency practices and issue mandates to ensure transparency in loan contracts and disclosures of lending terms. The report also suggests that there should be more frequent audits and better national oversight, published debt restructuring terms, and full participation from creditors in debt reconciliation processes. The World Bank is currently working to expand their global Debtor Reporting System to ensure that quality data is being shared and utilised. Pablo Saavedra, the World Bank's vice president for prosperity, commented: 'Debt transparency is not just a technical issue—it's a strategic public policy that that builds trust, reduces borrowing costs, and attracts investment. Radical debt transparency not only supports debt sustainability but also unlocks private sector investment to drive job creation.'
