Hi, I’m Diego Rivetti, I am a Senior Debt Specialist, at the World Bank
and lead author of the report.
What is the report about?
This report is the first comprehensive assessment of debt transparency
in developing economies.
It presents the current challenges and outlines policy reforms to address them.
The report draws upon surveys and novel data
—for instance, about resource-backed loans—
as well as new tools—such as this one:
the World Bank’s debt reporting heatmap.
This tool tracks the level of disclosure of debt statistics
by the national authorities on annual basis.
What are the most prominent findings in the report?
One of the most striking findings of the study
is that nearly 40 percent of low-income countries have not disclosed any debt data
to their own citizens in the last two years.
Also, when available, debt statistics tend to cover only central government loans and securities,
omitting other public sector components and debt instruments.
Now, a point the report makes is that lack of transparency
is not necessarily the consequence of deliberate actions (the famous “hidden debt”)
but is often the result of weak legal and operational frameworks.
In addition, international statistical and accounting standards exist,
but they are not enforceable.
This results in a very convoluted reporting system,
where different definitions, coverage and evaluation methods are used.
This chart here gives you an idea of the complexity
of the current reporting system for a borrowing country.
This, includes direct reporting by the country on its website,
as well as indirect channels, such as the reporting to
to the World Bank, to the IMF, to credit-rating agencies.
Creditors keep their own tallies—and report to organizations such as the OECD.
Meanwhile, a growing number of private firms and academic institutions
also try to fill the gaps by putting together
often fragmentary information from a variety of public sources.
This convoluted system explains why when we look for debt data,
we can find significant differences figures across sources—
equivalent to up to 30% of a country’s GDP.
Is debt transparency only about data?
No, in fact the report also expands the definition of debt transparency,
Not only to cover the availability of debt figures,
but also the transparency of debt operations.
Let me give you three examples of debt operations that tend to be opaque:
First, Domestic Debt:
many low-income countries have been accumulating arrears that typically go unreported.
many low-income countries have been accumulating arrears
that typically go unreported.
At the same time, countries have increasingly relied on domestic markets—
which is positive because they tend to be a stable source of funding,
but may also pose transparency challenges.
Let’s take a look at the World Bank heatmap on domestic debt securities
which shows how transparent countries are when they issue their local debt.
The heatmap tracks five indicators that are critical for domestic borrowing.
The first category is the share of domestic debt issued through auctions:
In this area, only 41 percent of low-income countries use
transparent market-based auctions as their main issuance mechanism.
The second example of opaque debt operations
is RESOURCE-BACKED LOANS.
Let’s look at the extent of these loans in Africa.
We found there were 11 countries
—shown in orange here—
with debt that is collateralized by the country’s natural resources.
That amounted to nearly 10 percent of all new borrowing
in Sub-Saharan Africa between 2004 and 2018.
Yet, no country reports collateralization details.
Even their existence of this debt is often not disclosed—
because these are instruments that are not systematically recognized
and classified as debt.
And the final example of less transparent operations is,
NON-TRADABLE EXTERNAL DEBT.
And this includes loans that may get privately restructured
or Central Bank operations that are used to facilitate external borrowing—
rather than to implement monetary policy.
How can these challenges be addressed?
In the report we offer a number of policy recommendations
for each of the key actors involved:
borrowers, lenders, and International Financial Institutions.
I will mention two for each of them.
First, on the borrower’s side:
invest in capacity and systems to produce good debt data,
thus reducing the need for ad-hoc reporting to external agents.
And second, reform the legal framework to make it conducive to transparency,
for instance by defining public debt according to international standards,
specifying the borrowing authority, or requiring regular audits.
On the creditor’s side:
A first recommendation is to limit the scope of confidentiality clauses
and refrain from those that require secrecy.
A second recommendation is to publish granular information
on the sovereign lending portfolio,
as encouraged by the G20 Operational Guidelines for Sustainable Financing.
And finally for the international financial institutions:
one improvement would be to streamline
and consolidate data-collection processes and resulting databases.
A second important reform would be to provide
a regular assessment of countries’ adherence to
to international statistical and accounting standards.
As you can see, debt transparency requires broad international consensus
and commitment by all parties.
Only with that can we strengthen the ability to manage and prevent future debt crises.