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Improving debt data and reporting

Strengthening debt data quality and transparency helps countries have a more complete picture of their debt, guiding borrowers, informing creditors’ decisions on the appropriate magnitude and terms of lending, and enabling a broader community of stakeholders to monitor emerging risks. In a number of countries, there are significant gaps both in the data collected on public sector debt and the public availability of that data—gaps which have contributed to unfavourable surprises when unrecorded debt is ultimately exposed.

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  • These gaps can take the form of off-budget activities such as sovereign guarantees of private investments and state-owned enterprise debt. Confidentiality requirements may cloud the terms and conditions of loans, particularly collateralized debt. Moreover, in countries that only record debts when disbursed, contracted but undisbursed government borrowing will be hidden. In addition, the contingent liabilities built into PPP contracts are rarely recorded, despite their potential to generate public debt in the event the projects fail. 

 

  • Only the borrower can possess all the data and information on its borrowing activities; the borrower thus has responsibility for ensuring debt transparency. The average quality of debt management in institutions in developing countries has been improving only slowly however, leading to a lack of comprehensive debt data reporting. Results from the World Bank’s Debt Management Performance Assessment in 37 countries that have received at least two assessments over 2008-2015 point to uneven improvements in core debt management functions, particularly in areas central to debt transparency. Although there were some improvements in areas such as coordination with monetary policy and managerial structure, progress in, for example, debt evaluation and reporting, debt administration and data security, and operational risk management has been limited. Moreover, performance in the areas of audit and coordination between debt management and fiscal policy declined.   

 

  • Greater efforts are therefore needed in the area of capacity development in recording, monitoring, assessing, and adequately reporting debt, and the associated vulnerabilities and fiscal risks, supported by targeted training and technical assistance. In this context, the IMF launched the Data for Decisions Fund in June 2018, a trust fund to support capacity development in national statistics, which has identified improving the quality of debt data as an immediate priority. UNCTAD has also launched new initiatives in this area, as described in box 2. These efforts should be complemented by reforms to enhance governance in public financial management, as well as a strengthening of the legal framework for monitoring the borrowing of off-budget entities/funds and state-owned enterprises. 

 

  • Creditors can also improve public debt information, and their data on loans can complete and be compared with the data on borrowing recorded by debtor Governments. To this end, the IMF, the World Bank, the Bank for International Settlements, the Organization for Economic Cooperation and Development and the Paris Club have prepared creditor as well as debtor-generated data sets in the Joint External Debt Hub that they make public and continually seek to upgrade.  

 

  • The IMF and World Bank also promote debt transparency and sustainable lending through direct outreach to both traditional lenders (through the established OECD/Paris Club frameworks) and non-traditional lenders (through tailored advice and technical support). Outreach to non-traditional creditors will scale up, with a new training course for emerging creditors on debt sustainability analysis to be offered starting in the spring of 2019.  

 

  • The private sector Institute of International Finance has put forward an initiative for a coordinated information-sharing platform to encourage greater—albeit voluntary—disclosure among private lenders. It will be important to secure disclosure of the right information, and for lenders in all G-20 members to participate. All types of creditors should strive for simplified lending terms and avoid onerous conditions on sovereign borrowing. For example, in several recent distress cases, collateralized lending has complicated debt resolution.
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