The World Bank has issued a strong call for “radical” debt transparency from developing countries and their lenders, warning that hidden and complex debt arrangements threaten financial stability and risk triggering future crises.
In a report released on Friday, the Bank urged sovereign borrowers to implement sweeping reforms that mandate full disclosure of new loans, particularly those made through opaque, off-budget mechanisms such as central bank swaps and collateralized deals. These arrangements have grown increasingly common amid global market volatility, rising financing costs, and geopolitical instability.
“When hidden debt surfaces, financing dries up and terms worsen,” said Axel van Trotsenburg, Senior Managing Director of the World Bank. “Radical debt transparency, which makes timely and reliable information accessible, is fundamental to break the cycle.”
The World Bank is recommending that developing nations adopt legal and regulatory frameworks that require the disclosure of loan-level data, including the terms of debt restructuring agreements. It is also calling for regular audits, public release of contract terms, and for creditors, including state-backed lenders and private institutions, to open their loan and guarantee records.
Although 75% of low-income countries now report some debt data, only 25% disclose detailed loan-by-loan information, according to the Bank. The lack of transparency has already contributed to financial strain in several African countries. For instance, Nigeria’s central bank revealed in early 2023 that billions of dollars in reserves were tied up in complex deals brokered by previous administrations. Similarly, Angola was forced to pay a $200 million margin call following a plunge in its bond prices.
Countries such as Senegal, Cameroon, and Gabon have turned to so-called “off-screen” financing, private placements or deals not formally included in public debt statistics, raising concerns about hidden liabilities and misreporting. Senegal is currently in negotiations with the International Monetary Fund (IMF) over prior undisclosed borrowing.
The Bank argues that enhanced transparency would allow international institutions and markets to more accurately assess debt sustainability and reduce the likelihood of abrupt financial shocks.
“Greater visibility into public debt is not just good governance,” van Trotsenburg added. “It’s a shield against the next crisis.”
Written By Rodney Mbua
