A new World Bank report warns that opaque debt practices are endangering the financial stability of many developing countries and calls for “radical transparency” to prevent future crises. The report, titled Radical [Debt] Transparency, highlights that while public debt reporting has improved since 2021, significant gaps remain, especially in off-budget financing, collateralised loans, and domestic debt disclosures.
The Maldives is among the countries identified as facing high debt distress. In a footnote, the report cites an instance where India granted a one-year extension on two treasury notes worth USD 50 million purchased in 2023 by the Reserve Bank of India. However, critical terms such as the interest rates were not disclosed, raising concerns about transparency in bilateral arrangements.
Globally, the report reveals that nearly 60 percent of low-income countries are at high risk of debt distress. While 75 percent of countries now publish annual debt data, only one in four discloses loan-level information. The problem is especially acute in the case of contingent liabilities, state-owned enterprise debt, and unconventional instruments like central bank swaps and private placements.
For the Maldives, this is not just a matter of improving internal governance. As the country increasingly relies on external borrowing to finance development, the lack of comprehensive reporting could weaken investor confidence and obscure the true fiscal position. The report’s mention of delayed payments to contractors, hospitals, and fisheries-related businesses in the Maldives further highlights the local relevance of these global concerns.
The World Bank outlines urgent recommendations. Borrowers are advised to publicly disclose transaction-level debt data, expand oversight over unconventional loans, and consent to creditors publishing lending terms. Creditors, in turn, are urged to reconcile loan data, disclose restructuring terms, and include transparency clauses in agreements. Meanwhile, institutions like the World Bank and IMF are encouraged to develop systems for automated data reconciliation and support third-party audits.
Technological solutions like a Loan Clearing Module are already being piloted in Indonesia. These could be replicated in the Maldives, ensuring that both creditors and debt managers maintain real-time, harmonised records.
Ultimately, the report argues, transparency is more than just a technical fix. It is foundational to building trust, ensuring accountability, and avoiding the costly consequences of hidden debt. For small island developing states like the Maldives, which are especially vulnerable to economic shocks, ignoring these warnings could come at a steep price.
