World Bank Urges Developing Countries to Disclose Debts to Prevent Crises

The World Bank has called on developing countries to fully disclose their debts, aiming to prevent future financial crises. In a recent report, the bank advocated for "radical" transparency, urging nations to expand the scope and clarity of disclosures around new loans. Axel van Trotsenburg, senior managing director at the bank, emphasized the importance of timely and reliable information in breaking the cycle of hidden debt and worsening financing terms.

The World Bank is pushing for countries to implement legal frameworks that mandate transparency in loan contracting and ensure the disclosure of detailed debt information. The institution also wants nations to conduct regular audits and public disclosures of debt restructuring terms, and asks lenders to reveal the details of their loans and guarantees. Additionally, the bank urges countries to adopt improved tools that help international financial institutions identify cases of misreporting.

While the World Bank and other multilateral banks have been advocating for increased transparency for some time, their efforts may have encouraged countries to step up. The percentage of low-income countries disclosing debt data has risen from under 60% in 2020 to more than 75%. However, only 25% of these countries reveal loan-level data, and multiple countries have resorted to central bank swaps and collateralized transactions that make it challenging to report data.

Some countries have faced challenges due to hidden debts. Senegal has relied on private debt placements as it works through discussions with the IMF concerning previous debt misreporting. Similarly, Cameroon and Gabon have resorted to “off-screen” deals, and Angola was forced to cover a $200 million margin call following a sharp decline in its bond prices. Meanwhile, Nigeria’s central bank revealed in early 2023 that a significant portion of its foreign exchange reserves—worth billions of dollars—had been locked into complex financial agreements.

The World Bank's call for transparency is part of a broader effort to foster greater accountability in the management of sovereign debt. By mandating governments to disclose loan-by-loan details, clarify fiscal obligations, and align borrowing with climate and development goals, the initiative is creating a new paradigm where transparency becomes a competitive advantage. This shift allows investors to identify undervalued sovereign bonds, mitigate systemic risks, and capitalize on yield advantages, especially in times of heightened market volatility due to geopolitical tensions.

The World Bank's efforts are no longer theoretical. In May 2025, 16 Caribbean nations participated in a landmark workshop to adopt the Commonwealth Meridian software, a tool designed to standardize debt reporting. This initiative, co-led by the IMF and Commonwealth Secretariat, has already increased low-income countries' debt data reporting to 75%, up from 60% in 2020. While only 25% of these nations disclose granular loan details, the progress signals a structural shift toward accountability. For investors, this means lower systemic risks. Governments that voluntarily disclose debt portfolios gain credibility, reducing the likelihood of hidden liabilities triggering sudden defaults. This is particularly important in regions where off-budget borrowing and opaque central bank swaps have historically sparked crises.

The transparency push creates a sorting mechanism for bonds. Countries that comply with disclosure standards become safer bets, even if their yields remain higher than developed markets. For example, Zambia renegotiated $12 billion in debt under the G20 Common Framework after publishing its full creditor list. The bond's yield dropped from 22% to 14% post-disclosure, offering a risk-adjusted return unmatched by U.S. Treasuries. Meanwhile, climate-aligned transparency adds another layer. The World Bank's climate finance portfolio prioritizes nations using debt proceeds for green projects. Investors can now favor bonds from countries where a significant portion of new debt is tagged to sustainability metrics, reducing both environmental and financial tail risks.

The Middle East's geopolitical tensions have skewed regional debt markets. While sovereign bonds from oil exporters remain stable, emerging markets in the region face liquidity crunches. Here, transparency becomes a lifeline. Investors can distinguish between opaque borrowers and those embracing transparency. For instance, Jordan has reduced its debt opacity by 30% since 2023, enabling it to secure IMF support and stabilize yields. Such cases prove that transparency can turn political instability into an investable edge.

The World Bank's transparency push is rewriting the rules of emerging market debt investing. By rewarding clarity and penalizing opacity, it's creating a new yield hierarchy where compliant nations offer safer, higher returns. In a world of geopolitical storms, transparency isn't just an ethical choice—it's a profitable one. For investors willing to sift through the data, the Caribbean's progress, Africa's restructuring strides, and Asia's climate-linked bonds form the core of this transparency dividend. The era of “blind” emerging market investing is ending—and the winners will be those who see clearly.