In a recent report, the International Monetary Fund (IMF) has raised concerns over $1 trillion in undisclosed public debt globally, warning that it poses serious threats to low-income countries suffering from dire fiscal strains.
In a post on their official X account, the IMF outlined how hidden government liabilities tended to compromise accountability and raise corruption risks and aggravate financial instability.
According to the IMF, “hidden debt is any borrowing that a government incurs and does not make known to either citizens or creditors.” Such non-registered obligations, however, can reach alarmingly high levels.
The IMF pointed out that although global public debt exceeds $91 trillion, the external liabilities disproportionately affect the economically underdeveloped countries, where disbursement needs have increased recently, accompanied by burdensome interest rates at which such debts are raised. “Annual refinancing needs for low-income countries have increased threefold in recent years, which adds to the fiscal pressures in a slow-growing economic environment,” it added.
Increased risks of corruption and deterioration in economic governance emanate from the poor debt transparency, the Fund warned. In its current publication, The Legal Foundations of Public Debt Transparency, which exposed weaknesses in the legal framework of 60 countries by way of inadequate debt definitions, poor disclosure requirements, and handicaps to oversight mechanisms.
Speaking on the need for complete legal reforms as far as debt transparency is concerned, the IMF cited some examples of best practices, including Ecuador, Ghana, and Rwanda. In 2020, for instance, Ecuador extended its definition of public debt to include short-term instruments, such as treasury bills.
