The World Bank has issued a strong call for sweeping reforms in how developing countries and their lenders report public debt, warning that lack of transparency could trigger future financial crises.

In a report released Friday, the Bank emphasized the need for significantly greater openness about borrowing arrangements.

According to Axel van Trotsenburg, the Bank’s senior managing director, countries must commit to disclosing accurate and timely debt information to prevent abrupt financial shocks.

“When undisclosed debts come to light, credit dries up and lending terms worsen. Radical transparency is key to breaking this damaging cycle,” he said.

The report urges sovereign borrowers to implement legal and regulatory frameworks that require comprehensive disclosure of all new loans.

These reforms should include publishing detailed loan data, releasing the terms of any debt restructuring, conducting regular audits, and encouraging lenders to make their loan books public.

Additionally, the Bank is advocating for stronger tools that would allow global financial institutions to detect inaccurate or incomplete debt reporting.

While there has been some progress over 75% of low-income countries now report at least basic debt statistics, compared to under 60% in 2020 only a quarter disclose detailed, loan-level information.

Rising global borrowing costs have led many countries to adopt more opaque arrangements, such as central bank currency swaps and loans secured by national assets, which often escape formal debt reporting systems.

Several African nations have recently engaged in such complex financial deals.

Senegal, for instance, has turned to private placements while it works through debt disclosure issues with the IMF.

Cameroon and Gabon have also relied on less-visible borrowing channels. Angola was recently hit with a $200 million margin call following a sharp decline in bond prices.

In Nigeria, it was revealed in early 2023 that a large portion of foreign reserves had been locked into complicated contracts by the previous central bank leadership.

The World Bank argues that providing complete, loan-by-loan information is essential for accurately gauging a country’s true debt obligations.

Only with such transparency, the Bank says, can the global community offer effective support and avert crises.