World Bank Warns of Hidden Debt Crisis, Calls for 'Radical Transparency' Among Developing Nations

 

World Bank

The World Bank has issued a strong warning to developing countries, urging them to adopt sweeping reforms in debt reporting to avert a looming global financial crisis driven by opaque and undisclosed borrowing.


In a newly released report titled “Radical Debt Transparency”, the Bretton Woods institution cautioned that many countries face rising fiscal instability due not only to external economic shocks, but to the growing prevalence of hidden loans and unconventional financing arrangements.


> “Debt transparency is essential to safeguarding and monitoring debt sustainability,” the report stated. “Yet too often, the world learns of unsustainable debt only when it’s too late.”





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Opaque Borrowing: A Crisis Brewing in the Shadows


The report, released on Friday, underscores how off-budget financing, private placements, central bank swaps, and collateralized loans have become increasingly common—yet remain poorly reported.


The World Bank called on both borrowers and lenders to publish comprehensive debt data, enact legal reforms mandating loan disclosure, and regularly audit and release the terms of debt restructuring deals.


> “Several countries have gained full market access only to later face economic collapse as hidden debts were exposed,” the report warns. “Without decisive action, new debt crises will be born not just from shocks—but from silence.”





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Van Trotsenburg: Time for a Transparent Overhaul


The World Bank’s Senior Managing Director, Axel van Trotsenburg, emphasized the urgency of the situation. He said while progress has been made in some areas, the lack of accurate and timely debt reporting continues to undermine fiscal sustainability.


> “This report calls for radical debt transparency, moving away from opaque practices and toward full, consistent, and real-time disclosure,” van Trotsenburg stated.




He added that rising interest rates and tighter refinancing conditions are pushing many countries to rely on shadowy external financing tools, while domestic debt levels surge under weak disclosure frameworks.


> “Partial and confidential restructurings have also become more frequent, depriving markets of crucial information and delaying comprehensive recovery solutions,” he warned.



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