The International Monetary Fund has warned that undisclosed public debt, estimated at $1 trillion globally, poses a growing threat to economic growth in low-income nations already grappling with mounting fiscal challenges.
In a blog post shared on its official X account on Thursday, the IMF warned that undisclosed government liabilities undermine accountability and increase the potential for corruption.
The global financial body noted that such liabilities are particularly concerning for low-income countries already struggling with debt burdens.
“Hidden debt is borrowing for which a government is liable, but which is not disclosed to its citizens or other creditors,” the IMF said. “While this debt—by its nature—is often kept off the official government balance sheet, it is very real, reaching $1tn globally by some estimates.”
The global public debt currently exceeds $91tn, but the IMF warns that undisclosed obligations, though comparatively smaller, disproportionately impact developing economies struggling with skyrocketing refinancing needs and higher interest rates.
The IMF noted that low-income countries, already burdened by debt, are particularly vulnerable. “Annual refinancing needs in these countries have tripled in recent years,” the IMF said. “The problem is even more pressing amid weaker economic growth and the current high-interest-rate environment.”
Accountability, it added, is at stake without accurate information about the extent of borrowing. “Without transparency, the risk of corruption increases, as does the potential for fiscal crises,” the statement read.
In its latest paper, “The Legal Foundations of Public Debt Transparency: Aligning the Law with Good Practices, the IMF presented findings from a survey of 60 countries, highlighting vulnerabilities in domestic legal frameworks that enable hidden debt.
These include narrow definitions of public debt, inadequate disclosure requirements, confidentiality clauses in contracts, and weak oversight mechanisms.
“A comprehensive legal framework is critical to ensure debt transparency,” the report stated. “Fewer than half the countries surveyed require debt management and fiscal reports, and less than a quarter mandate disclosure of loan-level information.”
The Fund explained that it actively works to bring the benefits of debt transparency to countries through technical assistance and integrates the issue into its program engagements.
The IMF also pointed to countries like Ecuador, Ghana, and Rwanda as examples of best practices in debt transparency, citing Ecuador’s 2020 reforms to broaden the definition of public debt to include short-term financing instruments like treasury bills.
The IMF’s call for greater debt transparency comes at a time when the global debt landscape is becoming increasingly complex, with low-income countries particularly vulnerable to the consequences of hidden and undisclosed borrowing.
