Public debt confidentiality: Separating fact from fiction

Hidden debt – the debt that is not disclosed to citizens or creditors – is a consistent and “remarkably pervasive” feature of the world’s sovereign debt crisis. By 2030, global public debt is predicted to reach 100 percent of GDP; but the growing problem of hidden debt indicates that the situation is likely more bleak.

When governments take on debt, they are putting their citizens’ futures up as collateral. When hidden debt is discovered and the impacts are felt, it is the citizens who pay the highest price. They typically face increased taxes and weaker public services as governments are forced to slash social spending to cover the cost of loans.

While the problems of hidden debt are well known, tackling their root causes remains challenging. Efforts to increase public debt transparency remain hobbled by a combination of interconnected challenges, including weaknesses in right to information laws, deficiencies in national legal frameworks and ineffective institutional oversight. Increasingly, however, the rise of confidentiality clauses in public debt agreements is enabling both borrowers and lenders to justify hiding loan information from public scrutiny and, in the worst cases, to hide the existence of the debt itself.

This report, jointly developed in partnership with the National Democratic Institute and Open Government Partnership, examines the problem of debt confidentiality clauses in public debt. Citizens have a right to know about their country’s debt because public debt is the public’s debt. The report includes:

• An overview of confidentiality clauses, their scope, and the types of lenders that most commonly use them
• A discussion of the benefits and weaknesses of right to information laws in fostering debt transparency
• A description of the six most common fictions used by lenders and borrowers to justify the use of confidentiality clauses and detailed information to separate fact from fiction
• Targeted recommendations for borrower countries, creditors and creditor countries, and the international community to improve debt transparency and democratic debt governance practices