World Bank Urges Radical Transparency Amid Rise in Complex Debt Arrangements

As global financial conditions tighten, a growing number of developing countries are relying on off-budget and increasingly complex borrowing methods, according to a new World Bank report titled Radical Debt Transparency. The report warns that these evolving debt practices, often opaque and difficult to track, are obscuring the true extent of public debt burdens and exposing countries to heightened financial risk.

The report argues for a paradigm shift in debt reporting and disclosure, urging both debtor and creditor nations to adopt broader, more detailed, and timely reporting practices. At stake, the World Bank emphasizes, is not just fiscal responsibility—but long-term economic stability, trust, and investment confidence.

Rising Use of Off-Budget and Hidden Debt

The report finds that countries are increasingly turning to non-traditional borrowing instruments, including:

• Private placements outside regulated financial markets;

• Central bank currency swaps;

• Collateralized loans, sometimes backed by natural resources or strategic assets;

• Silent restructurings involving select creditors that bypass transparency standards.

These tools may offer short-term liquidity or flexibility, but they also complicate monitoring by regulators, investors, and civil society, making it harder to assess sovereign risk. The opacity, the report cautions, risks triggering a vicious cycle where once-hidden debt surfaces, financing dries up, and countries double down on even more opaque deals.

Transparency Still Limited

While the proportion of low-income countries publishing some form of debt data has grown from below 60% in 2020 to over 75% today, the report shows that only 25% publish loan-by-loan information on newly contracted debt—a key gap in transparency.

Domestic borrowing is also on the rise, yet disclosure practices for locally issued debt often lag behind external borrowing. Additionally, some governments are increasingly relying on confidential or incomplete debt restructuring processes, which deprive markets and the public of crucial information.

Breaking the Cycle with Radical Reform

“Recent cases of unreported debt have highlighted the vicious cycle that a lack of transparency can set off,” 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.”

To remedy this, the report proposes a comprehensive set of reforms, including:

• Legal mandates requiring detailed debt reporting and disclosure of lending terms;

• Public release of loan contracts, especially for significant or collateralized borrowing;

• More rigorous audits and independent national debt reviews;

• Creditor participation in debt reconciliation, particularly for bilateral and commercial creditors;

• Disclosure of debt restructuring agreements once finalized, to improve trust and accountability.

Transparency as a Strategic Public Policy

“Debt transparency is not just a technical issue—it’s a strategic public policy that builds trust, reduces borrowing costs, and attracts investment,” noted Pablo Saavedra, World Bank Vice President for Prosperity. “Radical debt transparency not only supports debt sustainability but also unlocks private sector investment to drive job creation.”

Enhancing Global Monitoring Systems

Central to the World Bank’s advocacy is the Debtor Reporting System (DRS)—the largest verifiable database of external debt held by low- and middle-income countries. The World Bank is currently working to expand DRS to include domestic debt portfolios, improve data quality, and link it to emerging tools like environmental, social, and governance (ESG) debt indicators.

This technical assistance is already helping countries implement debt transparency reforms tailored to their legal and fiscal systems.

Toward a Transparent Debt Ecosystem

The World Bank's message is clear: building a transparent global debt ecosystem is essential to stabilizing public finances, regaining investor confidence, and achieving sustainable development. Without swift reform, countries risk undermining their own financial credibility and stalling the private investment needed to power job growth and infrastructure development.