Debt

Public debt in developing countries has been increasing. The share of International Development Association (IDA) countries at high risk of external debt distress has doubled since 2013. The median interest payment among low-income countries (LICs) rose 128 percent between 2013 and 2017 while government revenues grew just 31 percent. This rise in debt-servicing costs has left many governments with less to spend on critical public services.

These developments pose a challenge to the global effort to end extreme poverty and achieve other Sustainable Development Goals (SDGs) by 2030. To meet those goals, countries will need to invest at least 4.5 percent of national GDP each year on infrastructure alone. Governments in developing countries will need to find ways to finance these investments without letting debt grow to unmanageable levels.

Debt transparency is critical in this regard. Policymakers in borrowing countries need reliable debt information to make informed borrowing decisions. Creditors, donors, analysts, and rating agencies need it to assess sovereign creditworthiness, and to appropriately price debt instruments. Citizens need it to hold their governments accountable.

Approach

The World Bank Group takes a comprehensive approach to enhancing debt transparency—through its own engagement with more than 100 low- and middle-income countries and in close collaboration with the International Monetary Fund (IMF).

The World Bank has one the highest rankings of the Aid Transparency Index. It proactively seeks to enhance debt transparency through technical assistance and operational engagements, such as Development Policy Finance Operations. The implementation of the revised Bank-Fund Debt Sustainability Framework for low-income countries led to improved debt coverage in debt sustainability analyses (DSAs), scaled up  training on DSAs for government authorities, and publication of a new interactive guide.

In 2018, the World Bank has launched—together with the IMF—a comprehensive approach to address debt vulnerabilities in low-income developing countries. Debt transparency is a key pillar of this approach. It also seeks to promote debt transparency in the context of the proposed Sustainable Development Finance Policy under IDA19 and through its engagement in international fora and outreach to other creditors.

IDA Results

• In Ethiopia, a current World Bank Development Policy Finance Loan (DPL) enhanced debt transparency through the publication of expanded annual debt reports and quarterly debt reports, from summer 2019 onwards. The expanded reports include enhanced reporting on debt (including external debt of state-owned enterprises, guarantees, and called guarantees), additional details on debt holders, and improved analytical components.
  
• Cameroon and Senegal increased their debt coverage in a recent Debt Sustainability Analysis prepared under the joint Bank-Fund Debt Sustainability Framework.
  
• In fiscal year 2019, the Bank helped the Ministry of Finance of Togo design the country’s first public debt portal, consolidating in one website all of Togo’s debt-related information—including debt statistics, debt-related documents and legislation, and an issuance calendar. The portal resides on the website of the Ministry of Finance.