World Bank Warns Growing Hidden Debt Threatens Developing Economies

(MENAFN) In a crucial report released Friday, the World Bank raised alarms over the growing reliance of developing economies on off-budget and intricate borrowing schemes, a trend that is obscuring the true extent of public debt risks. This surge in non-transparent financing methods is complicating the accurate assessment of national debt levels, the institution noted.

The report, titled "Radical Debt Transparency," calls for sweeping reforms in how both debtor and creditor nations report and disclose debt obligations. Among its key recommendations are the expansion of reporting requirements and the introduction of more detailed, loan-specific disclosures to ensure clarity and accountability.

While the publication of certain debt data by low-income countries has increased from under 60% in 2020 to over 75%, the report highlights a concerning gap: only a quarter of countries are providing granular details on individual loans tied to newly acquired debt.

The World Bank also pointed to the rise of complex financial instruments such as central bank swaps, special allocations, and collateralized transactions, which further obscure the true financial picture. These opaque borrowing mechanisms, the report warns, are making it even harder for external observers to assess the sustainability of national debts.

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