Bussiness Desk

More than half of the world’s low-income countries are either already in or nearing a high risk of debt distress, the World Bank has warned, calling on global leaders to adopt “radical debt transparency” to avert future financial crises.

In its latest report, Radical Debt Transparency, the Bank reveals that 54 percent of low-income countries face severe debt vulnerabilities, with many spending more on debt repayments than on essential sectors such as education, healthcare, and infrastructure combined.

“Without urgent action, future debt crises will not only be the result of economic shocks, but also of undisclosed and misunderstood liabilities,” said Axel van Trotsenburg, World Bank Senior Managing Director, in a signed commentary accompanying the report.

The report underscores that while past international efforts like the Heavily Indebted Poor Countries (HIPC) Initiative provided critical relief, today’s debt environment has grown significantly more complex. 

An increasing share of sovereign borrowing now occurs off-budget, through opaque arrangements, collateral-backed loans, and deals with non-traditional lenders.

Since 2020, the proportion of low-income countries publishing some form of debt data has risen from under 60 percent to more than 75 percent, the report notes. 

However, only one in four countries disclose loan-level data on new debt, raising concerns about the depth and consistency of current reporting standards.

The World Bank is urging stronger national oversight and full public disclosure of lending terms. 

It has also recommended leveraging technology to standardise debt-recording systems and enhance accountability, proposing the development of a joint digital platform for both borrowers and creditors.

“Transparency is not a luxury—it’s a necessity,” said van Trotsenburg. “It rebuilds trust with investors and supports long-term growth and stability.”

The report comes at a time when developing economies are grappling with shrinking access to affordable financing, further strained by global shocks such as commodity price volatility and climate-induced disasters.

While the World Bank and International Monetary Fund have extended technical assistance and financial support to vulnerable nations, and the G20’s Common Framework offers a mechanism for debt resolution, experts believe these measures remain insufficient without more coordinated and comprehensive action.

The report concludes by warning that debt crises—once largely reactive—must now be addressed proactively, with radical transparency serving as the first line of defence against yet another lost decade of development.