Public Loans, Private Gains: Addressing corruption across the debt cycle

The world is facing a mounting public debt crisis, with several countries burdened by rising repayment costs that often outpace spending on essential services like education and healthcare. While debt is a critical tool for financing development, weak governance and opaque financial practices create fertile ground for corruption, undermining accountability and deepening economic vulnerabilities.

This working paper explores how corruption risks permeate every stage of the sovereign debt cycle - from contracting and management to restructuring. Drawing on global trends and case studies from Ecuador and Papua New Guinea, it shows how hidden debt, opaque negotiations and misuse of funds divert resources away from public goods and into private hands. It also highlights the role of international creditors, state-owned enterprises and non-traditional lenders in perpetuating secrecy and poor accountability.

The paper reviews existing transparency and accountability initiatives and identifies key gaps, underscoring the need for stronger safeguards. It calls for urgent reforms by both borrowers and lenders, including more robust disclosure standards, mandatory anti-corruption audits, and meaningful engagement with civil society.