## The Legal Foundations of Public Debt Transparency: Aligning the Law with Good Practices (excerpt)

## Source details

**Canonical URL:** [The Legal Foundations of Public Debt Transparency: Aligning the Law with Good Practices (excerpt)](https://www.imf.org/-/media/files/publications/wp/2024/english/wpiea2024029-print-pdf.pdf)

## Other formats

- [Markdown version](/-/media/files/publications/wp/2024/english/wpiea2024029-print-pdf.pdf.md)
- [Structured JSON version](/-/media/files/publications/wp/2024/english/wpiea2024029-print-pdf.pdf.json)

---

### Scope and sample
- Legal analysis conducted on "sixty jurisdictions."
- Analysis centered on primary legal instruments: Constitutions, debt management and debt reporting laws, public financial management laws, fiscal responsibility laws, transparency laws, audit and statistics laws, and SOE laws.
- To a limited extent, subsidiary legal sources (regulations, by-laws, Memorandum of Understandings (MoUs)) were examined.

### Key findings on legal vulnerabilities that hinder debt transparency
- Statutory definitions of public debt are often limited to the central government or to specific debt instruments, allowing certain forms of sovereign debt to escape oversight.
- Less than 50 percent of countries surveyed require debt management and fiscal reports.
- Borrowing authorization provisions are often vague and lack a clear process for delegating that authority.
- Debt management offices often lack authority to monitor and collect information from many public sector entities that incur considerable debt.
- Few laws regulate confidentiality of public debt, leaving policymakers wide discretion to label debt contracts confidential.
- Accountability mechanisms (from SAI mandates to legislative oversight) frequently do not cover debt and debt operations fully.

### Broader context and drivers of concern
- Debt opacity compounds public debt vulnerabilities amid:
  - A changing creditor landscape with new official creditors and a wide array of commercial creditors.
  - A migration to off-balance sheet liabilities with large fiscal risks including contingent liabilities (CLs).
  - Increasing use of collateralized debt and debt with collateral-like features.
- The pandemic and the impact of the war in Ukraine significantly increased public debt and CLs, pushing LIDCs and some EMs to debt distress.
- Borrower confidentiality agreements have become broader in scope and more widely used, further limiting disclosure.

### Economic and governance costs of debt opacity (analytical points)
- Undisclosed debt:
  - Saps investor confidence and increases borrowing costs.
  - Jeopardizes debt sustainability by preventing borrowers from properly assessing fiscal risks.
  - Keeps creditors, rating agencies, and borrower countries in the dark.
  - Undermines credibility of debt and fiscal management and hampers negotiations to resolve debt distress.
  - Undermines accountability for the use of public resources.

### International initiatives and standards referenced
- IMF and World Bank Multipronged Approach (MPA) pillars: i) strengthen debt transparency, ii) support capacity development in public debt management, iii) provide suitable tools to analyze debt developments and risks, and iv) adapt IMF’s and World Bank’s lending policies to better address debt risks and promote efficient resolution of debt crises.
- IMF and World Bank G20 Operational Guidelines for Sustainable Lending (information sharing diagnostic tool).
- OECD Debt Transparency Initiative (data repository on private sector lending to low-income countries).
- UNCTAD and Commonwealth Secretariat debt management and recording systems (support loan-level information submission to World Bank’s Debt Reporting System).
- Institute of International Finance (IIF) Information Note for Voluntary Principles for Debt Transparency (template for carveouts from confidentiality clauses).
- Bretton Woods Sovereign Debt Working Group (promotes solutions incentivizing transparency).

### Identified gaps relative to international standards and guidelines
- Narrow coverage of debt often limited to central government and debt securities and loans.
- Underreporting of:
  - Extrabudgetary units (EBFs)
  - Social security funds
  - SOEs
  - Public-private partnerships (PPPs)
  - Other contingent liabilities
  - Collateralized debt and debt with collateral-like features
  - Domestic non-marketable debt and swap lines
- Fragmentation of institutional arrangements for public debt monitoring and reporting.
- Lack of public debt audits to ensure quality of data disclosure.

### Policy recommendations and legal reform priorities
- Establish a consistent and clear definition of public debt across all relevant legislation.
- Legally mandate public debt data reporting, including granular and loan-level information, terms and conditions, and non-financial covenants that affect debt service capacity.
- Clarify and unambiguously define borrowing powers and proper delegations of that authority at all levels of government.
- Clarify responsibilities among public entities for the monitoring and reporting of public debt (inclusive of subnational governments, EBFs, SOEs, SPVs).
- Strengthen legal provisions to regulate narrow exceptions to disclosure and provide clear guidance on conditions and scope of confidentiality.
- Consider development of standardized confidentiality clauses (with a role for IMF staff analogous to IMF involvement in CACs and MVPs).

### Definition and components of debt transparency used in the analysis
- Debt transparency defined as comprehensive, accurate, timely and consistent public sector debt data, plus publication of key information on public debt management and disclosure of debt-related risks.
- Elements included:
  - Public availability of comprehensive, accurate, timely and consistent public sector debt data, including on the terms and conditions of lending and other non-financial conditions that impact debt service capacity.
  - Publication of key information pertinent to public debt management:
    - Static information: borrowing authority and delegation mechanisms for all public sector entities, institutional arrangements, enforcement mechanisms related to debt transparency obligations.
    - Debt management operations: disclosure of liability management operations and debt restructurings.
  - Disclosure of debt-related risks, including contingent liabilities (e.g., from SOE, SPVs and EBFs borrowing and climate-related risks).

### Institutional and instrumental coverage: empirical patterns and recommendations
- Institutional coverage:
  - Survey findings (sixty jurisdictions sample): 30 percent define public debt as that of central government entities; 20 percent define public debt as that of general government; 17 percent define public debt as that of public sector.
  - LIDCs tend to have narrower coverage (central government).
- Instrumental coverage:
  - The majority of domestic legal frameworks surveyed do not adopt comprehensive coverage of debt instruments; more than a half of jurisdictions observed adopt a narrow coverage restricted to loans and/or securities.
  - Only 18 countries define debt as a broad financial obligation or have an open-ended list in the law.
- Good-practice drafting recommendations:
  - Adopt a single, clear definition of “public debt” across PDM/PFM/FRL laws, aligned with 2014 GFSM sectorization.
  - Avoid closed exhaustive lists of instruments; recognize economic substance over form and include an open-ended definition capturing debt-like obligations.
  - Align legal classification of public sector entities with international statistical standards and permit phased implementation where capacity is limited.

### Publication frequency, formats, and minimum content requirements
- Fiscal reports should include a balance sheet of all debt and liabilities and be published in a regular and timely manner in i) in-year budget execution and fiscal statistics reports on a monthly or quarterly basis, and ii) annual financial statements or accounts (FTC).
- Legal good practice for publications should specify:
  - roles and responsibilities for preparation and approval;
  - frequency for preparation and updates;
  - general minimum content while allowing the Executive to define detailed formats in regulations;
  - channel and timeframe for publication promoting timeliness and active dissemination.
- Status in surveyed jurisdictions:
  - Public debt management publications are rarely required by primary law.
  - Less than ½ of the countries require in their laws to publish MTDSs and ABPs.
  - Legal provisions mandating preparation and submission of annual debt management reports to Parliament are more frequent.
  - Only 37 percent of the countries surveyed require publication of debt bulletins and other debt data reports.
  - ½ of countries have legal requirements for publishing fiscal and statistical debt reports.
  - Less than ¼ of countries require disclosure of loan-level information.

### Granularity and loan-level disclosure: options and practices
- Legislative examples of loan-level disclosure:
  - Indonesia and Thailand legislate disclosure of individual loan contracts.
  - Seychelles conditions effectiveness of a loan on publication of specific information.
  - Mexico publishes transaction-level information and contracts under Freedom of Information laws.
- Recommended minimum loan-level terms to disclose: contracted and disbursed loan amounts, currency denomination, interest rate, fees, penalties, repayment terms, governing law, majority restructuring provisions, sovereign immunity waiver, and all material debt covenants.

### Contingent liabilities (CLs): definition, risks, and disclosure design
- CLs: payment obligations whose timing and amount are contingent on the occurrence of a particular discrete and uncertain future event or series of events.
- CLs can be explicit (guarantees, indemnities) or implicit (public expectations, political pressures).
- Common disclosure weaknesses:
  - Many jurisdictions authorize issuance of guarantees but few require disclosure on flows, stock, beneficiaries and risks.
  - Narrow coverage and unclear definitions reduce reporting of CLs, notably for PPPs.
  - Lack of requirements for budgeting for expected losses reduces incentives to disclose CLs.
- Good-practice legal elements for CLs:
  - Require regular disclosure of government exposure to CLs and maintain a registry of significant CLs.
  - Minimum legal requirements for each loan guarantee: type, intended purpose, beneficiaries, expected duration; total gross financial exposure; fees charged; crystallized guarantees; reimbursements/recoveries; and, where feasible, estimates of likely fiscal cost.
  - Integrate CLs disclosure into MTDS, annual debt management reports, fiscal risk statements and annual budgets.
  - Designate a central authority (MoF or DMO) in law to maintain guarantee registries with powers to require information.

### SOE debt reporting: legal requirements and common shortcomings
- Standards recommend reporting SOE borrowing data in aggregate form and/or consolidated with general government; align SOE disclosure with high-quality listed-company standards.
- Current situation:
  - SOE debt has grown significantly; in some countries SOE debt exceeds 20 percent of GDP and in several cases constitutes half or more of public sector debt stock.
  - Out of 56 countries evaluated by the World Bank’s Public Debt Reports Heatmap, only six complied with full institutional coverage including SOE debt.
  - SOE reporting is often limited to annual audited statements; minimum content and public accessibility are frequently not specified by law.
- Legal reform guidance for SOEs:
  - Laws should require SOEs to disclose debt with precise assignment of responsibility, periodicity, means of publication, and enforceable sanctions.
  - Governments need legal powers to collect SOE debt information and to issue implementing regulations.
  - Sanctions should be escalating and primarily corrective (correction plans, enhanced reporting, fines, suspension of transfers, asset disposal, borrowing authorizations).

### Collateralized debt and collateral-like arrangements
- Definitions:
  - Collateralized debt: debt underpinned by a pledged asset or revenue stream enforceable on default.
  - Collateral-like/quasi-collateral arrangements: no formal security interest but provide protection or credit enhancement (examples: commodities prepayments, ringfenced revenue receivables, escrow minimum balances).
- Transparency and policy concerns:
  - Collateralization can lower borrowing costs but may complicate debt management, reduce budget flexibility, and hamper debt restructurings.
- Legal gaps and good-practice elements:
  - Many countries do not specify who authorizes pledging state assets or which assets may be pledged.
  - Laws should require disclosure of collateral or collateral-like arrangements, define state assets, set authorization procedures (including parliamentary approval thresholds), require independent valuation and cost/benefit analyses, and increase granularity of debt disclosure to cover assets/revenue pledged.

### Confidentiality in debt contracts: challenges and minimum regulatory elements
- Observed problems:
  - A sharp rise in confidentiality clauses, including clauses placing the duty of confidentiality solely on the borrower.
  - Broad or blanket confidentiality clauses risk concealing material financial and non-financial contract terms.
  - “Exception to the exception” clauses (“unless required by applicable law”) may be ineffective where no statutory disclosure duties exist.
- Good-practice recommendations for law and policy:
  - Clarify interaction between secrecy laws and debt-related confidentiality; where FOI frameworks are weak, include tailored confidentiality rules in PDM/PFM laws.
  - Adopt confidentiality policies with intelligible criteria: types of non-disclosable information, duration, permissible disclosures (Parliament, SAIs, courts), consequences for non-compliance, and management of confidential information.
  - Consider standardized contractual confidentiality clauses with minimum domestic regulatory requirements.
- Minimum elements for confidentiality clauses:
  - Identify what information is confidential, who bears confidentiality duties, permissible disclosures, duration of confidentiality, and carve-outs for legislative/oversight/statutory disclosure.
  - Ensure the existence of a contract is not itself treated as confidential.

### Governance, parliamentary oversight, and SAIs
- Legislature:
  - Should receive annual debt management reports and have processes/staff/committees to exercise oversight across budget formulation, approval, execution and ex-post review.
  - Transaction-level approvals may be ex-ante or ex-post but must balance efficiency and accountability; confidential information should be accessible to legislative committees under appropriate arrangements.
- State Audit Institutions (SAIs):
  - Financial, compliance and performance audits are key tools; SAIs should have broad mandates covering central government, subnational government and public corporations.
  - Legal powers needed: access to information (including third-party data), obligation/right to publish audit results, and protection from political pressure.
  - Weak SAI mandates, restricted access, and narrow coverage hinder effective audits of public debt.

### Emergency borrowing, legal effects of noncompliance, and foreign courts
- Emergency borrowing:
  - Temporary Executive borrowing powers in declared emergencies must be subject to legislatively defined conditions and counterweighted by reporting and oversight (ex-ante or ex-post Parliamentary approval).
- Legal effects of noncompliance:
  - Jurisdictions vary: some guarantee State liability despite breaches (Moldova, Sweden, Tanzania); others invalidate unauthorized debt (Brazil, Nigeria, Seychelles, South Africa, Suriname).
- Relevance in foreign litigation:
  - Domestic borrowing authorization frameworks may be considered by foreign courts assessing actual or apparent authority; clear domestic law increases legal certainty in cross-border disputes.

### Key implementation gaps and priority reforms (conclusions)
- Persistent implementation gaps despite international standards include:
  - Limited coverage of reporting; underreporting by local governments, EBFs, SSFs, SOEs, and PPPs; misreporting of complex instruments; scarce loan-level disclosure.
  - Fragmented institutional arrangements and weak enforcement powers for central compiling agencies.
  - Weak legal treatment of confidentiality and insufficient legal requirements for CLs and collateralized transactions.
- Priority legal-reform areas:
  - Ensure consistency and clarity in the legal concept of public debt.
  - Provide clear authorization to borrow and establish clear delegation processes.
  - Enhance institutional arrangements for debt monitoring and management consolidation.
  - Regulate narrow exceptions to disclosure and prescribe conditions and scope of confidentiality with parliamentary oversight.
  - Strengthen legislative oversight and SAI scrutiny capacity.
- Sequencing and pragmatism:
  - Legal reform should be tailored, politically feasible, and sequenced; where legislative reform is not immediately possible, strengthen disclosure via secondary legislation, executive policies, and operational reforms.
- IMF role:
  - IMF will continue to foster debt transparency through standards promotion (SDDS, e-GDDS, SDDS Plus), surveillance and lending policies (DLP, MPA, DSA), and legal/technical capacity development including drafting assistance.

*Source: IMF Working Paper — "The Legal Foundations of Public Debt Transparency: Aligning the Law with Good Practices" (excerpt).*

### Annex I. List of Countries and Laws Surveyed ...........................................................................

### Annex I. List of Countries and Laws Surveyed

### Scope and sample
- Legal analysis conducted on "sixty jurisdictions."
- Analysis centered on primary legal instruments: Constitutions, debt management and debt reporting laws, public financial management laws, fiscal responsibility laws, transparency laws, audit and statistics laws, and SOE laws.
- To a limited extent, subsidiary legal sources (regulations, by-laws, Memorandum of Understandings (MoUs)) were examined.

### Key findings on legal vulnerabilities that hinder debt transparency
- Statutory definitions of public debt are often limited to the central government or to specific debt instruments, which allows certain forms of sovereign debt to escape oversight.
- Less than 50 percent of countries surveyed require debt management and fiscal reports.
- Borrowing authorization provisions are often vague and lack a clear process for delegating that authority.
- Debt management offices often lack authority to monitor and collect information from many public sector entities that incur considerable debt.
- Few laws regulate confidentiality of public debt, leaving policymakers excessive discretion to label debt contracts confidential for national security or other reasons.
- Accountability mechanisms (from SAI mandates to legislative oversight) frequently do not cover debt and debt operations fully.

### Broader context and drivers of concern
- Debt opacity compounds public debt vulnerabilities, especially in LIDCs and EMs, amid:
  - A changing creditor landscape with new official creditors and a wide array of commercial creditors.
  - A migration to off-balance sheet liabilities with large fiscal risks including contingent liabilities (CLs).
  - Increasing use of collateralized debt and debt with collateral-like features.
- The significant increase in public debt and CLs due to the pandemic and the impact of the war in Ukraine has pushed LIDCs and some EMs to debt distress.
- Borrower confidentiality agreements have become broader in scope and more widely used, further limiting disclosure.

### Economic and governance costs of debt opacity (analytical points)
- Undisclosed debt:
  - Saps investor confidence and increases borrowing costs.
  - Puts debt sustainability in peril by preventing borrowers from properly assessing fiscal risks.
  - Keeps creditors, rating agencies, and borrower countries themselves in the dark.
  - Undermines the credibility of debt and fiscal management and hampers negotiations to resolve debt distress.
  - Undermines accountability for the use of public resources.

### International initiatives and standards referenced
- IMF and World Bank Multipronged Approach (MPA) pillars: i) strengthen debt transparency, ii) support capacity development in public debt management, iii) provide suitable tools to analyze debt developments and risks, and iv) adapt IMF’s and World Bank’s lending policies to better address debt risks and promote efficient resolution of debt crises.
- IMF and World Bank G20 Operational Guidelines for Sustainable Lending (information sharing diagnostic tool).
- OECD Debt Transparency Initiative (data repository on private sector lending to low-income countries).
- UNCTAD and Commonwealth Secretariat debt management and recording systems (support loan-level information submission to World Bank’s Debt Reporting System).
- Institute of International Finance (IIF) Information Note for Voluntary Principles for Debt Transparency (template for carveouts from confidentiality clauses).
- Bretton Woods Sovereign Debt Working Group (promotes solutions incentivizing transparency).

### Identified gaps relative to international standards and guidelines
- Narrow coverage of debt often limited to central government and debt securities and loans.
- Underreporting of:
  - Extrabudgetary units (EBFs)
  - Social security funds
  - SOEs
  - Public-private partnerships (PPPs)
  - Other contingent liabilities
  - Collateralized debt and debt with collateral-like features
  - Domestic non-marketable debt and swap lines
- Fragmentation of institutional arrangements for public debt monitoring and reporting.
- Lack of public debt audits to ensure quality of data disclosure.

### Policy recommendations and legal reform priorities (prescriptive guidance drawn from analysis)
- Establish a consistent and clear definition of public debt across all relevant legislation.
- Legally mandate public debt data reporting, including granular and loan-level information, terms and conditions, and non-financial covenants that affect debt service capacity.
- Clarify and unambiguously define borrowing powers and proper delegations of that authority at all levels of government.
- Clarify responsibilities among public entities for the monitoring and reporting of public debt (inclusive of subnational governments, EBFs, SOEs, SPVs).
- Strengthen legal provisions to regulate narrow exceptions to disclosure and provide clear guidance on conditions and scope of confidentiality.
- Consider development of standardized confidentiality clauses (with a role for IMF staff analogous to IMF involvement in CACs and MVPs).

### Definition and components of debt transparency used in the analysis
- Debt transparency defined as comprehensive, accurate, timely and consistent public sector debt data, plus publication of key information on public debt management and disclosure of debt-related risks.
- Elements included:
  - Public availability of comprehensive, accurate, timely and consistent public sector debt data, including on the terms and conditions of lending and other non-financial conditions that impact debt service capacity.
  - Publication of key information pertinent to public debt management:
    - Static information: borrowing authority and delegation mechanisms for all public sector entities, institutional arrangements, enforcement mechanisms related to debt transparency obligations.
    - Debt management operations: disclosure of liability management operations and debt restructurings.
  - Disclosure of debt-related risks, including contingent liabilities (e.g., from SOE, SPVs and EBFs borrowing and climate-related risks).

*Source: IMF Working Paper — "The Legal Foundations of Public Debt Transparency: Aligning the Law with Good Practices" (Annex I and selected sections).*

### 10.   Calls by creditors and the general public for greater public debt transparency have intensified in

### 10.   Calls by creditors and the general public for greater public debt transparency have intensified in the last few years

### A. Purposes and benefits of public debt transparency
- Promoting sustainable borrowing and lending practices:
  - For borrowers: essential to properly plan, authorize, manage, monitor and communicate debt and control performance, including through external audit mechanisms. This could potentially reduce borrowing costs.
  - For creditors: addresses information asymmetries—facilitating risk assessments in the normal course of business, potentially reducing perceptions of credit risk, and assisting coordination in the context of debt restructuring.
- Enabling effective fiscal management:
  - Enhanced information on public debt helps inform the government of its current fiscal position and assess costs and benefits of policy changes and potential risks.
  - Allows external stakeholders to monitor fiscal and debt developments and establishes credibility of the country’s fiscal plans in support of market confidence.
  - Data on public debt should be consistent and comparable across jurisdictions.
- Empowering the international community, including IFIs such as the IMF and WB:
  - Enables assessment of debt vulnerabilities and sustainability, including for financial assistance programs in a manner that appropriately safeguards their resources.
  - Credit rating agencies give credit for increased debt transparency—which has knock-on impact on credit ratings, impacting borrowing costs for the sovereign—as well as SOEs and private sector borrowers.
- Supporting effective and efficient ESG reporting:
  - Improved debt transparency is especially valuable if/when a sovereign develops an Environmental, Social and Governance (ESG) framework.
  - Reporting requirements are one of the core pillars of managing an efficient and effective ESG framework.
  - Transparency and accountability can help the sovereign to gain high scores with second party opinion providers, as well as securing better pricing (lower costs) from ESG investors.

### B. IMF policies and international standards and guidelines
- Key international standards and guidelines that foster debt transparency:
  - The IMF/WB Revised Public Debt Management Guidelines of 2014 (Revised PDM Guidelines).
  - The Fiscal Transparency Code (FTC).
  - The 2014 Government Financial Statistics Manual (2014 GFSM).
  - The Public Sector Debt Statistics: Guide for Compilers and Users of 2011 (PSDS Guide).
  - Corporate governance and securities regulation guidance relevant to SOEs’ debt disclosure (OECD Guidelines on Corporate Governance of State-Owned Enterprises, 2015; International Organization of Securities Commissions).
- Standards and guidelines recommend for public debt data disclosure:
  - i) robust and comprehensive disclosure on public debt data with a broad institutional and debt instrument coverage;
  - ii) disclosure of explicit and implicit contingent liabilities (CLs);
  - iii) disclosure of the public debt management framework and debt management strategies and operations.
- Supporting mechanisms that domestic frameworks should include (minimum):
  - i) clear borrowing authority and powers to undertake other debt management operations;
  - ii) operational autonomy for debt managers;
  - iii) strong institutional arrangements for debt recording and compilation and dissemination of debt-related information;
  - iv) robust internal and external control and oversight mechanisms to provide assurance of data integrity.
- Note on granularity: international standards and guidelines largely do not purport to capture granular (e.g., contract-level) information on public debt.
- Key elements in Table 1 (summarized from standards):
  - Public debt data: monthly/quarterly reports on outstanding debt stock; composition by currency denomination, maturity and interest rate; domestic and external debt statistics; issuance, debt service, risk indicators, and debt stock by type of investor.
  - Fiscal reports: in-year budget execution reports, fiscal statistics, annual financial statements that include a balance sheet of all debt and liabilities.
  - Memorandum and detailed tables: creditor classifications by institutional sector; debt-service arrears; reconciliation market/nominal value; financial derivatives position; average interest rates by original maturity and type of instrument.
  - Contingent liabilities: disclosure in public accounts including cost and risk; valuation—face value or appraisal; budget allowance for expected losses and/or notes to budget tables and financial accounts; stock of CLs annually disclosed including government guarantees, beneficiaries, and gross exposure; a register of significant CLs is encouraged; CLs disclosed as memorandum items (guaranteed debt, one-off guarantees, legal claims, indemnities, uncalled share capital, etc.).
  - Static framework disclosure: PDM legal framework; organizational structure (including governance framework, DMO structure, delegation of responsibilities); design of debt instrument; legal framework for collection of statistical information; penalties for non-reporting, misreporting and late reporting; statistics dissemination process, concepts, definitions, classifications, and methodology.
  - Debt management strategies and operations: Medium-Term Debt Strategy Document (objectives, macro environment, evaluation of debt stock, key risk factors); annual report on DM strategy outcomes disclosed to Parliament and the public (with material operations, derivatives statistics and rationale for their use); DM operations in primary market (borrowing plans and terms and conditions of new issues).
  - Institutional coverage: central government (basic); general government (good); all public sector including public corporations and by subsector (advanced).
  - Debt instrument coverage: main financial obligations; all debt-securities and loans (basic); liabilities and other contractual liabilities (good/advanced) including trade payables, lease contracts, financial liabilities related to PPPs, equity holdings of public corporations, other liabilities arising from insurance, pension, standardized guarantee schemes.
- IMF policies promoting public debt transparency:
  - Surveillance: members required to provide data necessary for IMF surveillance (Article VIII, Section 5 of the IMF Articles of Agreement), understood to include at minimum central government debt data with decomposition across categories (currency, maturity, residency/non-residency).
  - Lending: members requesting financial assistance must provide information relevant to program implementation and ensure adequate safeguards for IMF financing; for members with debt vulnerabilities this includes granular information on debt holders under the Debt Limits Policy (see Box 1).
- Box 1: Selected IMF policies and debt transparency (summarized):
  - Debt Limits Policy (DLP): framework for using conditionality in IMF-supported programs with members facing public debt vulnerabilities. The 2020 update expects critical debt data disclosure gaps be addressed upfront in IMF-supported programs. The 2021 Guidance Note requires a table with the profile of debt holders in program documents featuring stock of public (external and domestic) debt and subcategories of creditors/instruments, creditor composition (multilateral, bilateral, bonds, commercial, other international), debt service for at least three years, collateralized debt, and domestic debt.
  - Multi-Pronged Approach (MPA): first pillar seeks to enhance debt transparency by supporting production and publication of comprehensive and consistent debt data by borrowers, improve access to data from borrowers and creditors, and enhance creditor outreach through investor relations initiatives. Emphasizes borrower responsibility and IMF/WB support to increase capacity to record, monitor, and report on public debt, develop legal frameworks, implement institutional and legal reforms, and disseminate debt data to international databases.
  - Debt Sustainability Analysis (DSA): frameworks require adequate disclosure of debt data. LIC DSF expects near-complete coverage of public sector debt, supported by standardized reporting. SRDSF requires comprehensive and detailed information on public debt presented in a standardized way. The IMF-WB DSA for low-income countries stipulates the obligation to include all future payments of interest and/or principal from the debtor to creditors, including fully committed but undisbursed amounts of recently contracted loans or still-active projects.
  - IMF arrears policies: sovereign arrears policies include expectations to increase transparency. Under the Lending into Arrears policy, the debtor should share relevant information with all relevant creditors on a timely basis including a comprehensive picture of the outstanding debt stock and its terms to meet the good faith criterion. Under the Lending Into Official Arrears Policy to Official Bilateral Creditors (LIOA), assessment of the good faith criterion will consider whether the sovereign has provided official bilateral creditors “relevant information” on a timely basis.

### C. Implementation shortcomings of international standards and guidelines
- Full implementation is lagging globally, posing greater challenges for LIDCs and EMs.
- Evaluations and assessments (DeMPA, FTE, and other assessments) evidence large implementation gaps.
- Common problems identified:
  - Narrow coverage of the budgetary central government and debt securities and loans.
  - Significant underreporting of debt from local government, EBFs, social security funds, SOEs and PPPs.
  - Underreporting of complex financial instruments such as collateralized debt in project finance transactions, debt with collateral-like features, domestic non-marketable debt, and swap lines.
  - Government guarantees have low reporting rates.
  - Newly contracted debt has low reporting rates, including details on terms and conditions of borrowing.
- Box 2 (DeMPA and FTE results) summarises key debt transparency-related challenges from country evaluation reports:
  - Publication of statistical bulletin on central government debt, loan guarantees and debt related operations.
  - Decision-making on issuance of loan guarantees, on-lending and use of derivatives.
  - Comprehensive debt management system that records, monitors and accounts effectively for all debt and debt-related transactions, including debt restructuring.
  - Financial and compliance audits.
  - FTE assessments indicate pressing challenges: narrow coverage of stocks in fiscal reports; low disclosure of assets and liabilities and significant risks; low disclosure of government guarantees, beneficiaries and gross exposure; shortcomings in PPP-related disclosure; deficient disclosure on financial condition and performance of subnational government and key SOE financial aggregates including assets and liabilities.
- DeMPA scoring notes: score A is sound practice; score B is between minimum requirements and sound practice; score C indicates minimum requirements met; score D indicates minimum requirements not met and performance deficiency requiring corrective action.

### D. The role of domestic legal frameworks
- (Section header included in source; substantive text not provided in this content unit.)

*IMF WORKING PAPERS The Legal Foundations of Public Debt Transparency: Aligning the Law with Good Practices — Excerpt from chapter 10*

### 2.   A robust domestic legal framework transforms the soft law nature of international standards and

### 2.   A robust domestic legal framework transforms the soft law nature of international standards and 

### Mandatory disclosure duties for public debt data and contingent liabilities (CLs)
- Impose a positive duty to disclose:
  - key information pertinent to public sector debt data, including on the terms and conditions of borrowing;
  - debt-related risks, including on debt-related CLs;
  - policies, strategy and operations on public debt management; and
  - static legal framework on borrowing and debt management governance.

### Supporting legal mechanisms enabling transparency
- Define the institutional and debt instrument coverage of public debt that will be used for different purposes, including for:
  - debt authorization and management;
  - fiscal reporting;
  - scope of application of fiscal rules; and
  - statistical reporting.
- Establish a clear authority to borrow and undertake debt-related transactions.
- Lay out the institutional arrangements for public debt recording, monitoring, reporting and disclosure, including the obligation of information sharing between public sector entities.
- Authorize limited circumstances where exemptions to public debt disclosure can be granted and provide legal mechanisms to limit their abuse.
- Define the accounting and statistical framework and standards for public debt disclosure.
- Establish the internal and external audit framework.
- Define legal mechanisms for accountability to legislative bodies and the public.
- As appropriate, regulate legal rights and processes for stakeholders, including citizens and legislators to demand information or to challenge validity in court.

### Composition and coherence of the legal framework
- The legal framework backing debt transparency can include:
  - constitutions;
  - supranational frameworks (which may become part of domestic law);
  - primary laws such as public debt management (PDM) laws, public financial management (PFM) laws, fiscal responsibility laws (FRL), statistics laws, laws defining accounting standards, some provisions in central bank laws, subnational government laws, SOE laws, and transparency laws.
- Strong coherence among legal instruments is required to ensure effectiveness of debt transparency provisions.
- Subsidiary legislation (regulations, decrees, instructions, circulars) further supports debt transparency; the allocation of items to primary law versus subsidiary legislation is influenced by:
  - constitutional division of powers between legislative and executive;
  - legal traditions and PFM models;
  - practical considerations such as feasibility and speed of reform.

### Legal definition and coverage of public debt — overview
- International standards and guidelines emphasize two key dimensions for public debt: institutional coverage and instrumental coverage.
- Common shortcomings:
  - institutional coverage often narrows to budgetary central government only;
  - instrumental coverage often limits to government securities and loans, excluding instruments such as supplier’s credit agreements, account payables, derivative instruments (e.g., swaps);
  - misalignment of domestic accounting and statistical practices with international standards, frequently not required by law.
- Law should ensure consistency and clarity in the concept of public debt, aiming for broad coverage of the whole public sector and of all debt instruments.

### Institutional coverage — whose debt?
- Principle: public debt transparency should apply to the entire public sector (per 2014 GFSM).
- International recommendations:
  - Revised PDM Guidelines recommend debt management and debt data disclosure encompass the main financial obligations included in the “central government’s mandate” and may be useful for other levels of government.
  - FTC recommends fiscal reports provide a comprehensive overview of fiscal activities of the “public sector and its sub-sectors.”
  - PSDS Guide (in line with the 2014 GFSM) recommends disclosure of core information on public debt statistics of the entire public sector, aggregate and disaggregated, covering general government (GG) including central government (CG) (budgetary central government (BCG), extrabudgetary units (EBFs), social security funds), state and local government; and public corporations (PC), including non-financial and financial.
- Survey findings (sixty jurisdictions sample):
  - 30 percent of the countries define public debt as that of central government entities.
  - 20 percent define public debt as that of general government.
  - 17 percent define public debt as that of public sector.
  - LIDCs tend to have narrower coverage (central government).
  - Some countries do not define institutional coverage in law or define it unclearly.
- Location of definition by law type:
  - PDM laws tend to have narrower coverage (central government) and cover borrowing authority, debt management, and controls on other public sector entities’ borrowing powers and reporting obligations.
  - PFM laws tend to have broader definitions to cover whole public sector and define obligations for fiscal reporting and monitoring contingent liabilities.
  - Fiscal responsibility laws can have varying coverage depending on scope for computation of fiscal rules (e.g., debt ceilings).
  - In the sample, most prevalent practice locates the definition in PDM or PFM laws.

### Legal issues hampering comprehensive institutional coverage
- Inconsistencies from multiple definitions across different laws or within the same law (examples in source: Angola, Seychelles).
- Unclear language in coverage and definition (terms like “government borrowing,” “borrowing on behalf of the Republic,” “state debt,” “government debt,” “national debt” may be undefined or ambiguous).
- Explicit exclusions or inconclusive attributions for liabilities of certain public entities (e.g., extrabudgetary funds, trust funds, special purpose vehicles).
- Misalignment of legal classification of public sector entities with 2014 GFSM sectorization creates challenges for reporting and oversight, especially for decentralized entities and EBFs that have administrative, budgetary, and financial autonomy but perform governmental functions.

### Good practice recommendations (legal reforms and drafting)
- Adopt a multi-pronged approach to address coverage and consistency issues:
  - i) Avoid inconsistent definitions across different legal instruments by including a single definition of public debt throughout different laws (PDM/PFM laws/FRLs) covering, to the extent possible, the whole public sector; cross-referencing definitions is highly recommended. If differentiated institutional coverage is needed, explicitly define carveouts.
  - ii) Use clear terms when defining institutional coverage; aim for a single definition of “public debt” across relevant legal instruments while recognizing country-specific cases; enable phased broadening in case of capacity constraints; define institutional coverage in law while leaving more detailed guidance to secondary legislation where appropriate.
  - iii) Include in the legal definition of public debt entities such as EBFs, public trusts funds, and SPVs, in line with international standards and guidelines; explicit listing can remove doubt (examples noted in source: Federation of Bosnia and Herzegovina, Mexico).
  - iv) Align legal classification of public sector entities with international statistical standards (2014 GFSM sectorization); pursue legal reclassification with appropriate phasing; where constitutional limits exist, ensure differently classified entities are subject to equivalent strict debt transparency principles.
- Legislative clarifications should allocate responsibilities for debt management where operational responsibilities remain fragmented across departments and agencies.

*Source: IMF Working Papers — The Legal Foundations of Public Debt Transparency: Aligning the Law with Good Practices (excerpt).*

### 10.   International standards, guidelines and initiatives provide guidance on the instrumental

### 10.   International standards, guidelines and initiatives provide guidance on the instrumental coverage of public debt and on their reporting and statistical treatment.

### Definitions and scope of public debt and liabilities
- A liability is an obligation of one entity (debtor) to provide funds or other resources to another entity (creditor). It is normally established through a legally binding contract that specifies the terms and conditions of the payment(s) to be made, and the payment according to the contract is unconditional.
- The criterion to define a liability as debt is that future payments of interest and/or principal (e.g., the volume of funds borrowed) are due by the debtor to the creditor.
- On this basis, the following are considered public debt instruments: debt securities; loans; insurance, pension, and standardized guarantee schemes; special drawing rights (SDRs); currency and deposits; and other accounts payable, including those that are overdue, i.e., arrears.
- International standards provide guidance on the statistical treatment of all debt-related arrangements, including complex transactions, such as PPPs, collateral and collateral-like debt, and trade credits.
- Debt-like instruments (e.g., currency and interest rate swaps used on behalf of the government or to finance government activities) are highlighted by the G20 Note on Strengthening Public Debt Transparency for additional recommendations on effective data collection and recording.

### Coverage in domestic legal frameworks: patterns and relationships
- The majority of domestic legal frameworks surveyed do not adopt a comprehensive coverage of debt instruments; more than a half of jurisdictions observed adopt a narrow coverage of debt instruments, restricted to loans and/or securities.
- Only 18 countries define debt as a broad financial obligation or have an open-ended list in the law.
- Few countries explicitly include arrears, suppliers credit agreements, and/or assumptions of payment obligations under guaranteed loans in the definition of public debt (examples given: Ecuador, Ghana, Zimbabwe).
- Countries with wider coverage refer to “liabilities” or “balance sheet” when requiring fiscal reports (examples given: Canada, Austria, Jamaica, Mauritius, Ghana, Uganda).
- Some countries have explicit exclusions of certain instruments from debt coverage (example exclusions: monetary obligation to cover temporarily cash positions within the fiscal year, or currency swaps — Austria, Ecuador).
- Government guarantees are explicitly mentioned in public debt coverage in more than 15 countries (examples given: Armenia, Georgia, Lithuania, Mongolia, Vietnam, Zambia, Zimbabwe).
- There is a strong relationship between institutional and instrumental coverage:
  - Jurisdictions defining public debt within central government entities tend to restrict debt instrument coverage to those within MoF or DMO responsibilities (generally issuing securities and contracting loans).
  - Jurisdictions that assign broader institutional coverage (general government or public sector) tend to have broader debt instrument coverage.

### Additional legal challenges identified
- Coverage limited to a narrow exhaustive list:
  - An exhaustive and closed list in the law, often covering only loans and government securities, risks excluding certain debt instruments (despite their economic nature as liabilities) from reporting and disclosure.
  - Commonly affected instruments include supplier’s credit agreements, liabilities derived from PPPs, and expenditure arrears.
- Explicit exclusions of certain debt instruments:
  - Short-term Treasury financing instruments can be excluded (Austria, Ecuador). Risks of hidden debt are high if no reporting/disclosure requirements or clear statistical treatment exist.
- Unclear treatment of atypical and complex financial instruments:
  - Instruments such as financial derivatives, including swaps, may give rise to debt-like obligations with similar economic effects as undisclosed borrowing in the event of default.
  - Recent experiences on pre-financing contracts with oil traders and collateralization of unrelated assets exposed recording and disclosure-related issues.
- Treatment of government guarantees and contingent liabilities:
  - While not yet actual liabilities, contingent liabilities are a source of fiscal risk and should be disclosed.
  - Some jurisdictions combine public debt and government guarantee ceilings (example: Ukraine); problems arise if legislation confuses guarantees with liabilities rather than imposing monitoring, recording and disclosure requirements.

### Box 4 — Ecuador: explicit exclusion of short-term Treasury instruments from the legal definition of public debt
- Historical provision:
  - The Organic Budget Code in Ecuador, until its reform in 2020, provided that “any securities or treasury paper having a term of less than 360 days” were excluded from the definition of public debt.
  - This provision addressed the constitutional requirement that public debt may only finance capital expenditure and not current expenditure (golden rule).
- Consequences:
  - Liquidity constraints led the government to use these instruments (CETES) as a medium-term financing instrument instead of a cash management tool.
  - The rollover and continued issuance created a structural debt stock that reached 5   billion USD in 2016.
  - The stock of CETES was not reported as debt in public debt management publications nor in fiscal or statistical reports.
- 2020 reform measures:
  i.  The exclusion of short-term cash management instruments from the definition of public debt was maintained, while short-term cash management instruments are now explicitly included in the computation of the debt ceiling.
  ii. Robust restrictions were introduced to avoid abuse, including: maximum maturity (360 days); annual limit on the stock of 8 percent of total expenditure; and a requirement that an annual report of issuance and reduction is included in the annual budget law.
  iii. Debt bulletins are now required to include a report on the stock of CETES, in line with statistical standards.

### Good practice recommendations on legal definitions and coverage
- Adopt a comprehensive definition of “debt instrument,” in line with international standards and guidelines, by:
  i) Adopting a definition that recognizes the economic equivalent functions of the debt instruments (substance over form). In line with the PSDS Guide, one fundamental element to define debt is that future payments of interest and/or principal are due by the debtor to the creditor. This approach provides scope to classify as debt new and/or atypical instruments not explicitly referenced in the legislation. Implementing regulations or manuals can assist practical implementation.
  ii) Avoiding a closed list of debt instruments in the law. A closed and strictly defined list may increase risks of regulatory arbitrage and require future amendments when new instruments are created. An open-ended list may still include guidance associated with the powers of the relevant entities or referencing the notion of debt.
  iii) Ensuring the definition of public debt is consistent across existing laws. It is recommended to include a single definition of public debt in one law (PDM or PFM laws) and have other laws cross-reference that definition.
  iv) Requiring that the law supports implementation of accounting and statistical principles in line with international standards and guidelines to ensure the economic nature of debt instruments prevails (examples: Ecuador, Mauritius).
  v) Providing for an appropriate legal treatment of guarantees and other contingent liabilities, including information and disclosure requirements even if guarantees are not included in the definition of public debt.

### Disclosure requirements: international guidance and domestic status
- International standards and guidelines recommend that domestic legal frameworks ensure both:
  - the legal powers to disclose public debt and contingent liabilities without inappropriate restrictions or limitations (“ability” to act),
  - and a legal obligation to disclose this information (“willingness” to act), commensurate with technical and institutional capacity.
- Levels and types of disclosure recommended by international standards:
  - Static publications: legal and regulatory framework for debt management; governance framework of the debt management office; borrowing powers; regulations and procedures for issuance and secondary market operations; statistics dissemination process, concepts, definitions, classification and methodology for public debt (PSDS Guide Para 6.16).
  - Debt management publications: Medium-term debt management strategy (MTDS); annual borrowing plan (ABP); issuance calendar; annual debt management report prepared, published and submitted to Parliament disclosing macro environment, borrowing activity, debt composition, materially important aspects of debt management operations and aggregate statistics on the derivatives’ portfolio.
  - Debt data publications: monthly and/or quarterly reports on outstanding debt stock and composition by currency, maturity, interest rate; disclosure of domestic and external debt and loan guarantees; issuance/disbursement and debt service payments; risk indicators (e.g., average residual maturity, average cost); debt due in one year or less and debt stock by type of investor; standard terms and conditions of relevant debt instruments.
- Implementation realities and standards’ flexibility:
  - International standards recognize capacity constraints and intra-government coordination challenges. The FTC distinguishes among ‘basic,’ ‘good,’ and ‘advanced’ practices with varied institutional coverage and granularity.
  - The Revised PDM Guidelines emphasize that the relevance of some principles varies based on institutional structures and stages of development.
- Status of domestic legal requirements (survey findings):
  - Public debt management publications are rarely required by primary law.
  - Less than ½ of the countries require in their laws to publish MTDSs and ABPs.
  - Legal provisions mandating preparation and submission of annual debt management reports to Parliament are more frequent.
  - Only 37 percent of the countries surveyed require publication of debt bulletins and other debt data reports.
  - ½ of countries have legal requirements for publishing fiscal and statistical debt reports (commonly found in PFM laws, e.g., annual financial statements or accounts generally audited and presented to Parliament).
  - Less than ¼ of countries require disclosure of loan-level information.

### Key practical implications
- Closed legal definitions and exclusions create risks of hidden or unreported debt and can undermine public debt transparency.
- Legal reforms should aim to align primary law with international standards, avoid closed lists, ensure cross-law consistency, and require alignment with accounting and statistical standards.
- Disclosure obligations should balance the “ability” and “willingness” to disclose, recognizing country capacity differences and providing graduated practices where appropriate.

*Source: IMF WORKING PAPERS — The Legal Foundations of Public Debt Transparency: Aligning the Law with Good Practices (excerpt).*

### 2.2 and PSDS Guide para 6.16)

### wpiea2024029-print-pdf - 2.2 and PSDS Guide para 6.16)

### Publication frequency, formats, and minimum content requirements
- Fiscal reports should include a balance sheet of all debt and liabilities and be published in a regular and timely manner in i) in-year budget execution and fiscal statistics reports on a monthly or quarterly basis, and ii) annual financial statements or accounts (FTC).
- The law must mandate specifically the public dissemination of debt-related reports to avoid treatment of debt reports as internal documents; publication should be made through accessible mediums, such as the MoF website. Obligations to publish in the official gazette may be kept depending on administrative and legal traditions; however, such disclosure may be less accessible and user friendly.
- Good practice legal provisions for debt-related publications should contain:
  - i) roles and responsibilities for the preparation and approval of the specific publication;
  - ii) frequency for preparation and updates;
  - iii) general minimum content of the publication, while leaving flexibility to the Executive to define in regulations detailed format and content;
  - iv) channel and timeframe for publication that promote timeliness and active dissemination.

### Legal gaps in dissemination, accessibility, and scope
- Even when law mandates preparation of debt-related reports, it may not impose an obligation to publicly disseminate them; reports can be treated as internal documents and not published.
- Where publication is mandated, the form and place of publication is very rarely specified; publication in the official gazette may be less accessible and user friendly than the MoF’s website.
- Submission to Parliament does not ensure wider public access unless expressly mandated; some laws give disclosing agencies discretion to choose publication channels.
- Institutional coverage of debt reporting obligations is often narrow:
  - Most laws surveyed require disclosure of the central government debt only, despite borrowing by decentralized entities, EBFs, SOEs and subnational and local government.
  - A few jurisdictions do not define the institutional coverage of reporting obligations (2–5 percent).
  - Several have ambiguous provisions on coverage (8–15 percent).
  - Half of the jurisdictions surveyed have legal provisions requiring a centralized public debt registry and statistical reporting covering either the public sector (PS), general government, or central government, but overall disclosure prescribed in the law among the surveyed jurisdictions remains limited.

### Granularity and loan-level disclosure
- Disclosure of individual loan contracts is envisaged in the legislation of Indonesia and Thailand.
- In Seychelles, publication of specific information on a loan is a condition for such loan coming into effect.
- In Mexico transaction-level information and contracts are published under the requirements of Freedom of Information laws.
- Options for legal design of loan-level disclosure include:
  - Information on newly contracted debt (examples: Seychelles, Sierra Leone, Thailand; quarterly reporting in Jamaica).
  - Borrowing in extraordinary circumstances may trigger additional disclosure obligations (example: Canada).
  - Decisions on borrowing authorizations published per transaction (Federation of Bosnia and Herzegovina) or in aggregated manner (Ghana).
  - General, standard financial and non-financial terms and conditions ideally disclosed: contracted and disbursed loan amounts, currency denomination, interest rate, fees, penalties, repayment terms, governing law, majority restructuring provisions, sovereign immunity waiver, and all material debt covenants that could subordinate other claims or give recourse to assets.

### Non-financial information and opacity risks
- Opacity surrounding non-financial information is a concern, particularly for debt in distress. Missing information may include governing law, default and acceleration clauses, debt collateral (especially involving natural resources), termination events, and seniority of creditors.
- Lack of non-financial loan-level information affects assessment and management of debt performance and risks and complicates debt restructuring processes.
- While disclosure of voluminous loan-level non-financial data may be difficult, requirements could be phased in while addressing implementation challenges; adoption of rules and procedures governing non-disclosure is important.

### Legal support for debt recording systems
- Laws could define key elements of debt registry operation while leaving operational functionalities to regulations:
  - The government entity responsible for managing debt records (e.g., MoF, DMO, or central bank).
  - Minimum content of records and mandate adoption of regulations on management, procedure and deadlines for data collection.
  - Principles governing debt records, including timeliness, comprehensiveness, and accurate records (examples: Ghana, Nigeria).
  - Integration requirements with financial management and information systems (examples: Argentina, Peru).
  - Clarification of institutional coverage of the debt registry; registry may encompass local government (Albania, Kenya) and SOEs (Federation of Bosnia and Herzegovina, Mauritius).
  - Where recording is not centralized, law could require entities outside central government with borrowing powers to maintain detailed records as prescribed by the MoF (Rwanda).

### Phased implementation, incentives, and examples of practice
- Where technical capacity needs to evolve, the law can provide for a phased implementation of reforms to secure internal consensus and develop capacity.
- Internal incentives and external demand can drive disclosure beyond primary-law requirements; such practices are often codified in subsidiary legislation.
- Examples:
  - Cameroon published project-related loan contracts with foreign creditors entered into between 1999 and 2017 absent legal requirements.
  - Kenya publishes granular terms of all individual public debt contracts.
- For many LIDCs and EMs, assessments on debt disclosure practices mirror shortcomings in domestic legal frameworks; Asia, Central Asia and Middle East show greater gaps.

### Good-practice recommendations and concrete provisions (Box 5 highlights)
- Well-crafted legal provisions require preparation, approval and publication across several report types:
  - MTDS: define timeframe horizon, assign responsibilities, link to debt management objectives, provide open list of minimum content (costs and risks, future borrowing requirements, macroeconomic framework, market conditions), require that debt operations comply with strategy, and mandate medium and date of publication (examples listed).
  - ABP: require annual preparation/updates, assign responsibilities, link ABP with MTDS, specify minimum content (planned borrowing operations, instruments, timing), and require publication.
  - Annual Debt Management Report: designate responsibilities, specify minimum content to assess outcomes (macroeconomic developments, market conditions, borrowing activity, debt composition, debt management indicators, yield curves), require publication within specified deadline in addition to submission to Parliament (examples listed); some jurisdictions require disclosure of terms and conditions of individual loan contracts (Indonesia, Thailand).
  - Statistical bulletins: specify timeline (semiannual, quarterly or monthly), minimum content (outstanding stock; composition by external/domestic currency, instrument type, interest-rate basis, maturity, creditor type, creditor residency; contingent liabilities; issuance/disbursements; debt service; risk ratios/indicators), and may include use of derivatives, project finance loans and PPPs, financial terms of loan agreements, and expenditure arrears; legal provisions may require publication on official MoF or Government website and alignment with international statistical standards (examples listed).

### Contingent liabilities: definition and disclosure relevance
- Contingent liabilities (CLs) are payment obligations whose timing and amount are contingent on the occurrence of a particular discrete and uncertain future event or a series of future events.
- CLs are typically not recognized as debt due to uncertainty over whether a payment will be required.
- CLs can be explicit or implicit:
  - Explicit CLs: statutory or contractual arrangements giving rise to conditional payment requirements (examples: guarantees, indemnities, letters of comfort).
  - Implicit CLs: do not arise from statutory or contractual sources but from public expectations, political pressures, or the perceived role of the state; examples include solvency support of the banking sector, discharging obligations of subnational governments, assuming unguaranteed debt of public sector units, and climate change-related risks.

*Source: Authors’ elaboration based on relevant standards included in the PSDS Guide, the FTC and the Revised PDM Guidelines; authors’ elaboration based on a survey of domestic legal frameworks across sixty jurisdictions; Authors’ elaboration based on selected indicators of the 2022 World Bank Debt Transparency Heatmap.*

### 29.   While CLs are not debt per se, their disclosure is essential for debt transparency. Information on

### 29.   While CLs are not debt per se, their disclosure is essential for debt transparency. Information on

### Importance of disclosure of contingent liabilities (CLs)
- CLs disclosure is essential to account for fiscal risks that may materialize.
- For borrowers, CLs disclosure enhances debt management planning by facilitating the determination of budget allowances for expected losses.
- For creditors, CLs disclosure provides critical information on the potential liabilities the jurisdiction is facing and their impact on the borrower’s repayment ability.
- CLs from government guarantees, SOEs debt and PPPs are a significant source of fiscal risks for LIDCs and EMs.

### International standards and guidance on CLs recording and disclosure
- International standards emphasize a clear legal framework for explicit CLs governing issuance, monitoring, disclosure, and budget allowance for expected losses (Revised PDM Guidelines and FTC).
- The Fiscal Transparency Code (FTC) recommends stricter disclosure for government guarantees by transaction, including identification of beneficiaries and gross exposure.
- A comprehensive assessment of all fiscal risks from CLs should be disclosed as part of the annual budget documents, and a register of significant CLs should be established (FTC, PSDS Guide).

### Practices and common legal challenges in CLs disclosure
- Many jurisdictions surveyed have legal provisions authorizing issuance of loan guarantees but few require appropriate disclosure on flows, stock, beneficiaries and risks.
- Jurisdictions with quantitative ceilings on government guarantees issuance seem to have better reporting and monitoring frameworks.
- Other weaknesses hindering CLs disclosure include:
  - Narrow coverage on the types of CLs (e.g., limited to loan guarantees).
  - Unclear definition or classification of what constitutes a CL (notably for PPPs).
  - Lack of requirements for budgeting for expected losses in the budget process, reducing incentives for disclosure.
- Some domestic laws assign responsibility for recording public debt to specific authorities; examples mentioned include MoF in Albania, Angola, Bosnia and Herzegovina, Brazil, Bulgaria, Ecuador, Ethiopia, Georgia, Lao, Lithuania, Mexico, Moldova, North Macedonia, Mongolia, Somalia, and Vietnam; DMO in Argentina, Ghana, Kenya, Sierra Leone; central bank in Liberia. (Surveyed practice examples appear in footnotes.)

### Good practice recommendations for CLs disclosure (legal design)
- Laws should require regular disclosure of government exposure to CLs; good practice is to include disclosure requirements in law.
- Minimum legal requirements for loan guarantees (for each guarantee):
  - i) type, intended purpose, beneficiaries, and expected duration;
  - ii) total gross financial exposure (i.e., the maximum amount guaranteed);
  - iii) fees charged;
  - iv) crystallized guarantees;
  - iv) any reimbursement, recovery, or counterclaim by the government of crystallized guarantees;
  - v) where feasible, estimate of the likely fiscal cost (expected payments).
- The requirements and operational processes for granting loan guarantees should be clearly disclosed.
- For the broader universe of CLs, legal frameworks should require disclosure of fiscal risks by the relevant fiscal oversight agency, such as through a fiscal risk statement, ensuring integration with the budget process and independent assessment and scrutiny by stakeholders (e.g., parliaments, and the public).
- Designating in law a central authority (MoF or DMO) to maintain a registry on government guarantees can enhance transparency; the authority should have powers to require information from contractual parties.
- CLs disclosure should be integrated into debt management publications and fiscal reports where possible:
  - Debt management reports: report stock and flow of guarantees (outstanding and new guarantees) in debt statistics and the annual debt management report.
  - MTDS reports: generally include guarantees being called/serviced or likely to be serviced in the future for market risk management.
  - Consider aggregate disclosure of budgetary provisions instead of transaction-level information for guarantees with high probability of being called to avoid moral hazard risks.
- Good practices for legal frameworks on government guarantees include provisions on:
  - authority for issuance and approval;
  - purposes and conditions for granting a guarantee;
  - obligations of lenders and borrowers;
  - requirements for risk mitigation tools (limits on aggregate stock or flow, credit risk assessment, payment of fees (risk-based or flat), authorization of only partial guarantees, and collateral);
  - sanctions for noncompliance.

### Examples of CLs disclosure integrated with debt management and fiscal reporting (Box 6 highlights)
- MTDS: Jamaica requires information on loan guarantees and other explicit CLs, together with the corresponding risk assessment.
- Annual Debt Management Report:
  - Federation of Bosnia and Herzegovina: must include information on issued guarantees, including amounts and debtors.
  - Seychelles: similar requirement exists.
  - Ghana: report should contain a list of outstanding government guarantees, with amount and beneficiaries.
  - Jamaica: report should include flow and stock of government guarantees and explicit CLs, including composition (currency, maturity, interest rate).
  - Uganda: PFM regulations detail disclosure content including outstanding guarantees, called guarantees and recovered amounts.
- Fiscal Strategy Document / Budget Framework Paper: Belize, Ghana, Jamaica, and Uganda require a fiscal risk statement including analysis of CLs and PPPs.
- Annual budget: Ghana, Uganda, and Rwanda require detailed information on CLs and government guarantees in the annual budget law.
- Debt bulletins / statistical reports: Bulgaria, Moldova, and Mozambique require quarterly public debt reports to include guarantees; Mauritius requires disclosure of estimated costs of their realization.
- Annual financial statements / public accounts: Angola, Austria, Canada, Ethiopia, Mauritius, Moldova, Uganda, and Zambia require a statement on CLs.
- Other reporting: Belize and Federation of Bosnia and Herzegovina have legal/political requirements to publish terms and conditions or decisions related to guarantees in the Official Gazette.

### SOE debt reporting framework — international standards and current practices
- Standards recommend reporting SOE borrowing data in aggregate form and/or consolidated with general government; identify institutional coverage and criteria for categorizing public entities as SOEs (PSDS Guidelines and FTC).
- Recommendations on publication focus on statistical aggregates or consolidation with sovereign debt.
- SOEs disclosure should align with standards for listed companies: externally audited financial statements (IFRS or national standards aligned with international standards), periodic reports (annual and half-yearly), and revealing material events (OECD Guidelines, IOSCO, IASB standards).
- Current situation and legal issues:
  - SOE debt has increased significantly in the last three decades; in some countries SOE debt exceeds 20 percent of GDP and in several cases constitutes half or more of public sector debt stock.
  - In some countries SOE external debt exceeds 25 percent of exports of goods and services.
  - SOE bonds account for one third of the entire emerging market sovereign hard currency debt.
  - In some jurisdictions, 90 percent of public corporations’ debt may be concentrated in the largest five companies.
  - 80 percent of the realization of contingent liabilities results from implicit forms of liability.
  - Governments assumed SOE debt obligations even when they had no prior knowledge of the obligations.
  - Information related to SOE bailouts and budgetary transfers to SOEs is usually inexistent and/or not accessible.
  - SOE debt may be used for off-balance sheet borrowing by central government, creating transparency problems including FX obligations.
  - Reliable information is lacking: out of the 56 countries evaluated by the WB’s Public Debt Reports Heatmap, only six complied with full institutional coverage by including information on SOE debt.
- Legal challenges identified in 29 surveyed jurisdictions include:
  - Most countries do not subject their SOEs to the same disclosure requirements as listed companies; laws generally require listed-company disclosure only if SOE shares/securities are traded.
  - Even where listed-company rules apply, data granularity on borrowing is uneven across countries.
  - Almost all countries require SOEs to prepare annual reports and audited financial statements, but minimum contents are generally not defined by law and disclosures are often aggregate.
  - Ineffective enforcement mechanisms hamper compliance: lack of MoF powers to monitor SOE debt reporting; poorly defined sanction regimes; inadequate sanctions not proportional to violations.
  - SOE financial information may be prepared and shared with government but without an explicit legal requirement to make it public; certain reports remain internal intragovernmental information.

*IMF Working Papers — The Legal Foundations of Public Debt Transparency: Aligning the Law with Good Practices*

### 40.   A robust legal framework is key to improving disclosure on SOE debt by governments and

### A robust legal framework is key to improving disclosure on SOE debt by governments and SOEs

### Legal requirements for SOE debt disclosure
- Laws should include the obligation to disclose SOE debt with:
  - a precise description of the entity, body or public official responsible for publication;
  - details on the information to be disclosed, the periodicity and timeliness, and the means for publication;
  - the applicable sanctions and enforcement mechanisms in case of non-compliance.
- The government should have the legal mandate and powers needed to collect information and to issue related regulations that further specify these requirements.
- Laws and legal instruments defining such requirements should be public and easily accessible.
- Institutional sanctions should be primarily aimed at correcting noncompliance and follow an escalating/graduated approach (examples of escalation):
  - submission of correction plans;
  - enhanced reporting;
  - low fines for severe violations;
  - suspension of discretionary central government transfers;
  - asset disposal requirements;
  - borrowing authorizations.
- Country practices noted:
  - Ghana, Kenya, Lao, Liberia, Mauritius, North Macedonia, Sierra Leone and South Africa require SOEs to prepare reports on their debt for transmittal to government (MoF) but no obligations to make them public exist.
  - Rwanda: public entities must maintain detailed records and accounts of borrowing and debt servicing in accordance with instructions prescribed by the MOF.
  - Federation of Bosnia and Herzegovina: SOEs must prepare and publish reports on debt and annual reports on debt management.
  - Azerbaijan, Mozambique and Vietnam require SOEs to publish annual reports and financial statements on their websites.
  - Bhutan, Pakistan, Sierra Leone, Somalia, South Africa and Zimbabwe require that SOEs accounts be laid before Parliament.

### Granularity of SOE debt disclosures and accountability
- More granular information on SOE debt can facilitate broader accountability, including scrutiny by legislatures and external audit bodies.
- Debt information disclosed according to capital markets standards may be useful to investors, creditors and performance evaluation bodies, and for fiscal risks monitoring and mitigation, but may not satisfy broader public accountability needs.
- International standards and guidelines could include recommendations for more granular SOE debt-related disclosures.
- Example: Mexico’s transparency legislation mandates disclosure of granular information on SOE borrowing (see Annex III reference in source).

### Creditor-based disclosure initiatives and features
- Recent initiatives recommend sovereign and private lenders disclose transaction-level financial information (amount of loans, beneficiary, use of proceeds, interest rate, maturity, structure and amount of collateral) and non-financial information (governing law, extent of waiver of sovereign immunity, dispute resolution mechanisms).
- Notable initiatives:
  - the 2017 G20 Operational Guidelines on Sustainable Financing (the “G20 Operational Guidelines”) and the 2019 Diagnostic Tool;
  - the 2019 IIF Voluntary Principles for Debt Transparency (the “IIF Voluntary Principles”).
- Key comparative elements (as described in Table 3):
  - Entities subject to disclosure requirements:
    - G20 Guidelines: Sovereign creditors.
    - IIF Voluntary Principles: Private creditors; institutional coverage includes “public sector entities”: sovereign (central) government; sub-sovereign government; public corporations; entities guaranteed by any of the above which represents debt liabilities.
  - Transactions subject to disclosure:
    - G20 Guidelines: Lending and financing agreements.
    - IIF Voluntary Principles: Financial transactions and guarantees (exceptions include local currency, monetary policy and trade finance transactions).
  - Types of information to be disclosed (selected items preserved as in source):
    - G20 Guidelines: amount of the loan; use of proceeds; interest rate; maturity and grace period; collateralization; applicable currency.
    - IIF Voluntary Principles: borrower; guarantor; type of financing; ranking; applicable currency; interest rate; intended use of proceeds; governing law; extent of waiver of sovereign immunity; dispute resolution mechanism; applicable collateral/security.
  - Mode of disclosure and frequency:
    - G20 Guidelines: Strong practice—Loan-by-loan information for all country’s official creditor agencies published by a government agency on a website and updated regularly.
    - IIF Voluntary Principles: Sound practice—Government creditor agencies disclose loan-by-loan to the IMF and the WB on existing exposure to borrowers and new lending at least on an annual basis. Relevant information should be publicly disclosed for each transaction.
  - Confidentiality:
    - G20 Guidelines: Strong practice—Publicly available templates are used by creditor; creditor refrains from confidentiality clauses.
    - IIF Voluntary Principles: Relevant carveouts (including regarding confidentiality provisions) should be respected, to enable public disclosure.
  - Nature and applicability:
    - G20 Guidelines: Voluntary, endorsed by G20 countries.
    - IIF Voluntary Principles: Voluntary nature. Initially applicable to foreign currency debt of PRGT eligible countries.

### Implementation, ongoing developments and legal impediments
- Examples of national implementation:
  - UK: publishes information on total sovereign exposure of UK Export Finance and Foreign, Commonwealth and Development Office by recipient country.
  - Canada: publishing information on loans to national governments, including loan-level information for individual borrowing countries.
- International developments:
  - March 2021: OECD announced launch of the Debt Transparency Initiative to operationalize the IIF Voluntary Principles by providing a platform for private sector lenders to submit transaction-per-transaction reports; reporting so far has been very limited.
  - 2021: Paris Club published information on total claims per country with limited granularity.
- Absent legislative requirements, disclosure by creditors depends largely on political support. The Bretton Woods Committee proposed that creditor-country domestic legal frameworks include mandatory disclosure by large financial institutions of lending arrangements with sovereigns; moving from voluntary to mandatory disclosure will require significant legislative revisions and sustained stakeholder support.
- Legal impediments to voluntary disclosure:
  - National legal frameworks (from borrower or lender’s jurisdiction or other relevant jurisdictions) may include limitations on disclosure (e.g., names, addresses under privacy laws) or be informed by public policy considerations (e.g., freedom of information acts).

### Common challenges in supporting legal frameworks for public debt disclosure
- Reporting requirements need robust legal mechanisms and are insufficient on their own.
- Key legal weaknesses that hamper transparency:
  - unclear allocation of roles and responsibilities in borrowing authorization (Parliament/Cabinet/MoF/DMO);
  - domestic frameworks may not specify delegation of borrowing powers or scope of delegated powers;
  - unclear restrictions/limits to borrowing (borrowing purpose, debt ceilings on stock and flow, qualitative restrictions);
  - complex or differentiated processes and exemptions by instrument type, transaction size, or local/foreign borrowing;
  - misalignments between subnational borrowing rules and intergovernmental fiscal relations;
  - EBF (extra-budgetary funds) borrowing challenges—monitoring and control issues when central oversight is weak;
  - SOE-specific complexities due to varied legal forms (stock corporations, statutory entities, non-corporatized bodies), double-tier authorization (internal corporate authorization and external government authorization), and potential perverse incentives for creditors/borrowers to exploit legal gaps.

### Borrowing authority framework: international guidance, common issues, and good practices
- International standards:
  - The Revised PDM Guidelines recommend legal clarity on i) the entity exercising borrowing authority, its mandate and powers, and delegated authority; ii) limitations to borrowing authority; iii) processes regarding borrowing operations, including LMOs and debt restructuring.
- Common legal issues (summarized):
  - unclear allocation of roles and delegation leading to unauthorized borrowing and non-disclosure;
  - inconsistent restrictions/limits and administrative controls for entities outside central government;
  - differentiated processes or exemptions across borrowing types.
- Specific issues for SOEs:
  - borrowing capacity may be implicit or explicit in founding documents; non-corporatized entities often require specific legal permission to borrow;
  - double-tier authorizations (internal corporate decision-making and external government approvals).
- Good practice recommendations (explicit elements preserved from source):
  - Clear authorization to borrow, including definition of powers, roles, and responsibilities within the borrowing process. Specific elements include:
    - i) a specification of the entity ultimately responsible for approving the borrowing (if multiple entities are involved, their powers should not overlap);
    - ii) clear criteria and conditions, as well as restrictions for borrowing;
    - iii) well-defined special authorizations that may be required for certain debt instruments or type of transactions deemed more critical;
    - iv) strict disclosure requirements of these borrowing powers, processes and decisions to the public to promote accountability.
  - Sound delegated authority to borrow (if any). The delegation framework should specify participating entities, powers that can be delegated, limitations or conditions, process of delegation, and impact on reporting requirements; it should follow general administrative law principles, including transparency on individual delegation decisions.
  - Adequate reporting and disclosure requirements on complex financial instruments, such as financial derivatives and collateralized borrowing and borrowing with collateral-like features (country examples: Gambia, Ghana, Kenya).
  - Clear borrowing authority for entities outside the central government and related central government controls to strike a balance between operational autonomy and appropriate oversight; in LIDCs, administrative controls from central government on borrowing may help ensure effective constraints, risk analysis, and reporting requirements apply to all public sector entities.
  - For SOEs the legal framework should:
    - specify the corporate body or government authority responsible for approving SOE borrowing and their powers to determine the information necessary to evaluate borrowing requests;
    - define reasonable timeframes that balance market opportunity with time needed for analysis of approving body;
    - ensure documents containing borrowing approvals for SOEs (both internal and external) are disclosed or made public upon request;
    - potentially empower the MoF to establish particular conditions and limits in each approval or require coordination with the sovereign’s own debt operations (Mexico).

*IMF Working Paper excerpt: The Legal Foundations of Public Debt Transparency: Aligning the Law with Good Practices*

### 53.   Any revisions to the exercise of borrowing authority in emergency situations should not hinder

### 53.   Any revisions to the exercise of borrowing authority in emergency situations should not hinder 

### Emergency borrowing, reporting, and oversight
- In case of a declared emergency the Executive may be temporarily vested with budgetary powers, which may include borrowing powers that were not granted to it before.
- Such temporary powers must be subject to conditions clearly defined by enabling legislation.
- Extraordinary legislative powers should be counterweighted by reporting and oversight mechanisms, including by ex-ante or ex-post Parliamentary approval.
- Example cited: Argentina—Law on solidarity and Productive Recovery for COVID-19 delegated public debt responsibilities, including borrowing authorization, to the Executive (footnote 107).

### Legal effects of noncompliance with borrowing authorization framework
- The legal framework should establish clear legal consequences resulting from non-compliance with the debt authorization provisions, including:
  - Legal effects on the validity of the instruments that support the debt obligation and on the disbursed funds.
  - Disciplinary, administrative and criminal sanctions for government officials.
- Jurisdictions surveyed show variation:
  - Many countries guarantee State liability as borrower regardless of breach (Moldova, Sweden, Tanzania).
  - In some countries unauthorized debt is explicitly invalidated by law (Brazil, Nigeria, Seychelles, South Africa, Suriname).
  - Seychelles: effectiveness of the contract is subject to the publication of its key terms (separate case noted).

### Foreign courts and the relevance of domestic borrowing authorization laws
- Clear and sound domestic laws for borrowing authorization may be taken into account by foreign courts in assessing legal validity of external sovereign debt (paragraph 56).
- More than 90 percent of all outstanding international sovereign bonds are governed by either New York or English law (paragraph 56).
- Loan contracts are more heterogeneous in governing law and venue; creditors’ domestic law, borrower’s domestic law, New York or English law, or arbitration forums may apply.
- Foreign (US and English) courts typically review whether the government’s agent had actual authority or apparent authority to bind the sovereign debtor:
  - Actual authority: legal capacity of the agent as determined by borrower’s domestic laws governing public debt management.
  - Apparent authority: may bind the government if creditors could reasonably rely on the debtor’s representations; legal standard guided by the instrument’s governing (foreign) law but courts may consider domestic borrowing authorization processes.
- Accessible, clear, and uniform domestic borrowing authorization frameworks can increase legal certainty and support consideration of domestic laws in foreign court proceedings.
- Box 8 summarized: foreign courts may analyze issuer’s domestic law under certain circumstances; contracting parties can reduce enforcement risk by, for example, expressly stating in the governing law clause that issues relating to authorization are governed by domestic law, and by putting creditors on notice regarding domestic debt authorization laws.

### Governance arrangements for public debt consolidation and disclosure — Concept and international standards
- Governance arrangements for timely and comprehensive public debt consolidation and disclosure are essential for debt transparency (paragraph 57).
- Domestic legal frameworks define responsibilities of the authority collecting information and duties of public entities required to provide information (paragraph 57).
- International standards/guidelines referenced:
  - Revised PDM Guidelines: recommend clear allocation of roles and responsibilities among government institutions for managing central government debt, including for debt reporting (paragraph 58).
  - Fiscal Transparency Code (FTC): highlights coordination and disclosure of fiscal relations and performance across the public sector; recommends subnational governments and public corporations disclose information individually and as a consolidated sector (paragraph 58).
  - PSDS Guide: calls for a “strong and well-organized institutional setting” for compilation and dissemination of public sector debt statistics; promotes primary responsibility of a central compiling agency (CCA) with legal basis to collect data and enforcement mechanisms for non-compliance (P6.13 and 6.10) (paragraph 58 and footnote 110).

### Common legal issues that may cause underreporting of debt liabilities (paragraph 60)
- Lack of clear and adequate powers in legal framework for entities responsible for collecting information or for debt disclosure, exacerbated by:
  - Inadequate corresponding duties by public sector entities (SOEs, local governments) to provide information.
  - Limitation on the types of information requestable from public sector entities.
  - Absence of adequate enforcement mechanisms.
- Fragmented institutional arrangements and lack of appropriate coordination mechanisms:
  - Multiple entities authorizing, monitoring, overseeing public debt create coordination challenges for consolidating public sector debt data.
  - The entity responsible for consolidation may be dependent on various sources, facing risks of loss of information in the compilation chain.
- Unclear legal requirements on recording debt information: absence of clear provisions on responsible entity, data to be recorded, timing of recording, and consequences of failure to record.

### Good practices and legal reform measures (paragraphs 61 and Box 9)
- Strengthen the legal mandate for debt compilation and disclosure, including clear coordination mechanisms among public sector entities:
  - Two-pronged approach to strengthen legal mandate:
    - Ensure the MoF or designated central agency has clear legal authority to obtain necessary information from public sector entities (including independent entities such as SOEs, EBFs, social security entities) and from other parties to the debt obligation (including private entities).
    - Define corresponding obligation of public entities to comply with information provision requirements on a regular and ad hoc basis, in the format determined by the designated compiling agency, and establish enforcement mechanisms for non-compliance.
- Enhance legal mechanisms to facilitate coordination:
  - Clarify in law the responsibilities of the MoF, DMO and other agencies.
  - Provide legal basis for integration between the Financial Information Management System and the Debt Management Information System (footnote 111).
- Clear requirements and process for debt recording of subnational government and SOE debt:
  - Require local authority or SOE to maintain records on borrowings, report debt information to the MoF/DMO, and submit additional information upon request.
  - MoF/DMO could keep a database of records on outstanding subnational and SOE debt.

- Box 9 — Case of Ecuador: PFM Reform Strengthening the Information Provision Component
  - Organic Budget Code reform strengthened intragovernmental reporting obligations:
    - Budgetary and financial information: public sector entities must share budgetary and financial information as prescribed by the Code and technical norms (Art. 152).
    - Fiscal risk management: General state budget, decentralized autonomous governments, social security entities and SOEs must prepare their fiscal management documents and cooperate with the MoF.
  - Regulation to the Organic Budget Code established more granular reporting obligations to the MoF on public debt operations and required entities to ensure permanent access to economic, financial, and budget information through their webpages (Art. 185).
  - Law and regulations incorporated sanctions for non-compliance with information provision requirements:
    - Institutional sanctions (Organic Budget Code Art. 152, Organic Budget Code Regulation Art. 211).
    - Personal sanctions (Organic Budget Code Arts. 178, 179).

*Source: IMF Working Paper — The Legal Foundations of Public Debt Transparency: Aligning the Law with Good Practices*

### 62.   The use of collateralized debt obligations and quasi-collateral or collateral like arrangements

### 62.   The use of collateralized debt obligations and quasi-collateral or collateral like arrangements

### Definition and features
- Debt collateralization: granting to a creditor of rights over an asset or revenue stream that allows the creditor to rely on such collateral to secure repayment of the debt in case of the borrower’s default.
- Collateral may be existing or future asset (stock) or a future flow or stream and may or may not be directly linked to the relevant loan contract.
- “Collateralized debt” implies a debt underpinned by something pledged as security that will be forfeited in case of default.
- “Collateral-like” or “quasi-collateral” transactions: no lien or formal security interest; instead provide protection or credit enhancement used continuously while the loan is being repaid and are not forfeited in case of default. Examples include:
  - commodities prepayments
  - ringfenced revenue receivables
  - minimum balance required in escrow accounts or other type of deposit or proceeds accounts

### Transparency and policy concerns
- Use of collateralized or collateral-like arrangements in sovereign borrowing often raises transparency concerns.
- From a policy perspective, while these arrangements could help lower the borrowing rate, they may:
  - complicate debt management and increase the probability of overborrowing;
  - reduce budget flexibility, especially if revenue streams are earmarked;
  - hamper debt restructuring efforts, as creditors with collateral or collateral-like arrangements are reluctant to restructure their claims, and debt service capacity and risks of debt distress are difficult to assess, or may be incompatible with the existing negative pledge clauses.

### International standards and guidance
- The Fiscal Transparency Handbook mentions reporting collateralization against natural resource revenues.
- The 2014 GFSM defines asset-backed securities and collateralized debt obligations as “arrangements under which payments of interest and principal are backed by payments on specified assets or income streams.”
- Policy analyses note that “disclosure requirements should include guarantees, security arrangements, offtake commitments, loans linked to forward commodity sales, and any other contingent obligation of the central government.”

### Common legal challenges (findings from surveyed countries)
- Most countries do not define in their laws who authorizes debt collateral over state assets or future receipts (e.g., the MoF, Cabinet, Parliament) and consequently what approval process should be followed; execution by an SOE or SPV can further complicate authority to pledge collateral.
- Few countries define the type of assets which can be subject to collateralization or in collateral-like transactions. Examples of legal prohibitions on posting certain assets as collateral noted in surveyed frameworks include:
  - international reserves (Azerbaijan)
  - present and future assets of petroleum funds (Uganda)
  - regional property (Indonesia)
  - repos and derivative transactions (Lithuania)
- Rarely do laws stipulate specific reporting requirements for collateralized debt or collateral-like arrangements or the granularity of information to be disclosed, creating challenges where legal classification of the underlying transaction as public debt or liability is unclear; even if classified as a liability, collateral (or quasi-collateral) elements may not be subject to specific reporting requirements.

### Good practice recommendations (legal framework elements)
- Stronger disclosure requirements should apply to collateralized and collateral-like transactions to determine assets available for repayment.
- Legal framework should include:
  - Disclosure requirements based on a clear and broad notion of security/collateral and collateral-like arrangements, including all transactions where a borrower pledges an asset or future income to a lender to secure repayment. Resource-backed loans and similar collateral-like transactions should also be subject to clear reporting requirements.
  - Clear and comprehensive coverage of the underlying debt transaction and the type of public entity (to capture advance payments, SOEs and SPVs, etc.). Support application of accounting and statistical rules in line with international standards and guidelines.
  - Authorization and procedural requirements for entering into collateral agreements with regards to public debt and using collateral-like features, including defining which entity may pledge state assets as collateral (e.g., central government only or SOEs or other autonomous entities). Authorization processes may envisage a special procedure (e.g., parliamentary approval based on a specified threshold).
  - A clear state asset management framework clarifying what assets are considered “state assets” and the restrictions or prohibitions on the types of assets that can be pledged as collateral.
  - Requirement, when considering collateral-like features, for an independent valuation of the credit enhancement (both legal and financial aspects), including a cost/benefit analysis of the transaction and an assessment of whether the transaction complies with a public policy objective.
  - Increased granularity of debt disclosure requirements to enhance accountability, covering among others the nature of assets or future revenues used as security and the nature of projects financed through collateralized debt or benefitting from collateral-like arrangements.

### Illustrative cases of misuse of confidentiality in debt operations (Box 10)
- “Tuna bonds scandal” in Mozambique:
  - In 2016 it was revealed that three Mozambique state-owned companies (ProIndicus, MAM and EMATUM) had contracted loans valued at approximately USD 2.2 billion, in violation of legally required procedures. The MoF authorized five separate guarantees in connection with these loans which were not approved by the Parliament, did not receive an opinion from the Public Prosecutor, and were therefore in breach of Mozambique’s budget law. One of the main reasons indicated by the Enquiry Commission of Parliament and by the external audit report is the claim that such transactions were a matter of national security and the documentation forming the basis of the government guarantee requests was subjected to less scrutiny.
- Secret and reserved classification of documents related to internal and external borrowing in Ecuador:
  - In 2010 three Resolutions by the MoF of Ecuador declared all administrative acts, contracts and documentation related to operations of public indebtedness (internal and external) as secret and reserved until the full repayment of capital and interests or other financial costs. A special audit report in 2018 concluded that the MoF did not provide the legal and technical reasoning required by the Budget Code (Art. 137) to demonstrate that those transactions could generate losses or conditions unfavorable to the interests of the State, and that the resolutions limited access to information to general citizens and to the external audit, harming monitoring of public debt operations.
  - The audit report recommended:
    - The declaration of reserved/secret information linked to public debt operations by resolution be limited to cases determined by law and that the reasoning must be duly justified.
    - After subscription of the credit operation, all the information and documentation be made available to the public through the MoF’s website, and that the declaration of reserved/secret information may not extend beyond the placement of bonds or signing of contracts.

*IMF Working Papers — The Legal Foundations of Public Debt Transparency: Aligning the Law with Good Practices*

### 70.   The lack of specific limitations in the law on confidentiality of debt-related information may have

### 70.   The lack of specific limitations in the law on confidentiality of debt-related information may have

### Legal challenges from broad confidentiality in debt contracts
- Increased use of non-disclosure agreements at the contractual level has been observed, contributing to a sharp rise in confidentiality clauses in public debt contracts.
- Some limited confidentiality may be needed to preserve market integrity (reduce risk of leaks of market-sensitive information during issuance of government securities).
- Governments hold complex information in the course of borrowing that can be shielded by other privacy and data protection laws; however, guidance on proper use of confidentiality for debt-related operations is often lacking.
- Over past decades the use of confidentiality clauses has increased, more recurrently in bilateral non-marketable loans, creating the following legal challenges:
  - Duty to maintain confidentiality, cui bono?
    - A recent phenomenon: requiring that the duty to maintain confidentiality falls upon the borrower alone.132
    - This reverses traditional roles where lenders assumed the burden as recipients of information from the borrower for due diligence or debt sustainability analysis.133
  - Confidentiality clauses too broad in scope
    - Blanket or general clauses increase the risk of concealment of important financial and non-financial information of public debt operations, especially in countries with weak transparency frameworks.
  - Ineffective "exception to the exception"
    - Many bilateral loan contracts include a proviso: “the Borrower shall not disclose any information... in connection with this Agreement to any third party unless required by applicable law.”
    - Such provisos aim to promote transparency, but in many jurisdictions they may be ineffective because legal frameworks generally do not mandate disclosure of granular loan information; therefore the proviso does not offer a real safeguard against opacity.
- Box 11 summary: Broad confidentiality clauses requiring confidentiality of the entire agreement (including a “safeguard” excepting disclosure if required by law) are often ineffective without supporting legislation providing clear guidance on conditions ensuring such disclosure.
  - Sample clause excerpt (from a government debt contract):
    - “The Borrower shall keep all the terms, conditions, and the standard of fees hereunder or in connection with this Agreement strictly confidential. Without the prior written consent of the Lender, the Borrower shall not disclose   any information hereunder or in connection with the Agreement to any third party unless required by applicable law.”
  - Risks highlighted:
    - The onus of confidentiality falls solely on the borrower.
    - Could be interpreted as requiring the borrower to keep the entire agreement confidential, or that the existence of the agreement itself is confidential.
    - The exception “if required by law” is ineffective without statutory obligations to disclose.

### Good Practice Recommendations (paragraphs 71–75)
- Clarify interaction between secrecy laws and confidentiality of debt-related information (para 71):
  - Modern access-to-information laws are being recalibrated to advance transparency while recognizing Executive authority to classify information bearing on national security.
  - Reforms aim to balance transparency and other public interests by:
    - i) limiting the scope or conditions for classified information and levels of confidentiality;
    - ii) providing for declassification criteria and processes; and
    - iii) requiring parliamentary oversight (see Annex 9 on reforms in Japan, Moldova, and Poland).
  - PDM and PFM laws could clarify applicability of these elements to debt-related sensitive information for legal certainty.
- Two approaches depending on strength of FOI frameworks (para 72):
  - Where a robust FOI framework is in place, PFM or PDM laws could expressly cross-reference the FOI law to promote consistency, particularly if FOI law prescribes debt disclosure and narrow grounds for confidentiality.
  - Where FOI framework is nonexistent, weak, or not well implemented, introduce a robust framework regulating confidentiality in public debt-related laws to ensure Executive discretion is not abused.
    - Such framework could define scope/conditions and time limits of confidentiality and establish mechanisms for external scrutiny through administrative or judicial remedies.
  - Note: Core confidentiality elements have been integrated in other PFM areas (public expenditure, procurement, extractives). See Annex 10 for country examples.
- Adopt confidentiality policies where law cannot provide all guidance (para 73):
  - Policies should set intelligible criteria and processes for non-disclosure in debt contracting, including:
    - i) what type of debt information could be subject to non-disclosure;
    - ii) term/length of validity of confidentiality agreement;
    - iii) exemptions (e.g., information already publicly available or made available to Parliament or state audit institutions, court orders issued);
    - iv) consequences for non-compliance; and
    - iv) management of confidential information.
  - Australia example (Box 12): Department of Finance policies regulate confidentiality in government contracting with legal basis in Privacy Act (1988), Freedom of Information Act 1982 (FOI Act) and the Australian Government Protective Security Policy Framework.
    - Confidentiality test in Australia distinguishes:
      - General clauses (restate legislative obligations) and
      - Specific clauses (protect confidential intellectual property, commercial sensitive information).
    - Criteria if departing from standardized model: information must be identified, precise and specific; commercially sensitive; and likely to adversely impact commercial interest/competitive advantage.
    - Management practices: confidentiality clauses do not prevent contract disclosure; maintain central record of confidentiality provisions (type, timeframe, state of information, manage disclosure/public versions).
- International proposals for standardized confidentiality clauses (para 74):
  - Standardized market clauses may help restrict the minimum information that cannot be disclosed and over time rule out secrecy.
  - Policy rationale: keep proprietary, commercial/price sensitive, or national security information confidential.
  - Different levels of contractual standardization may be necessary given variety of sovereign debt instruments and creditors.
  - Full alignment between contract and governing law needed where governing law imposes disclosure requirements; otherwise standardized clause may be overridden by statutory provisions.
  - Where authorized by law, confidentiality clauses can exempt some financial terms; however, aggregated information on debt position, borrowing and average terms of debt should always be disclosed.
  - Standardized clauses should apply to new contracts only, raising the need to address outstanding stock issue.136
- Minimum domestic regulation for confidentiality clauses (para 75):
  - Confidentiality clauses should at minimum include:
    - i) which information is subject to non-disclosure, who owns the information, and who bears responsibility for non-disclosure;
    - ii) instances of permissible disclosure (e.g., to comply with law, stock exchange rules, or if data becomes public or available to Parliament/state audit institutions, court orders);
    - iii) duration of the duty of non-disclosure (term);
    - iv) appropriate carve-outs for lender and borrower granting rights to disclose information.
      - For borrowers: carve-out should reserve right of public officials to prepare and publish reports or studies required by legislation using information derived from the contract.
      - For lenders: carve-out could enable disclosure to international databases such as the IIF/OECD.
    - General carve-outs: disclosure mandated by law, regulations, judiciary or other competent authorities.137
  - Box 13: Key elements to consider when drafting confidentiality clauses:
    1. State financing agreement can be published or made publicly available in records, subject to appropriate redactions for confidential information.
    2. Describe clearly the type of information that is confidential or establish a confidentiality test.
    3. Identify the party(ies) with duty to maintain confidentiality and reference the owner of the confidential information.
    4. Specify permissible disclosure instances (courts, competent authorities, required by legislation, public domain).
    5. Stipulate term of confidentiality; limit to a reasonable period (perpetual clauses or unspecified durations may be unreasonable/anti-competitive in some jurisdictions).
    6. Establish option for mutual agreement on disclosure with a determination process based on established criteria.
    7. Affirm that the existence of the agreement itself or its annexes and amendments is not confidential.
  - Sources informing Box 13: Loan Market Association, multilateral development banks’ contracts with sovereigns, and AidData.
  - References: IMF (2023)136; Rosenblum et al (2009)137.

### Accountability mechanisms and legislature’s role (paras 76–79)
- Transparency enables accountability; domestic laws should ensure:
  - i) a robust oversight role of the legislature over public debt disclosure, and
  - ii) proper scrutiny by independent institutions, such as SAIs, including assurance of debt data integrity.
- Robust debt management legal frameworks and borrowing objectives are critical for LIDCs to guide Executive operations, define institutional arrangements for debt disclosure and approval of borrowing, and monitor debt.
- Effective legislative oversight requires sound processes, institutions, and staff with technical capacity.
- SAIs play a fundamental role via financial, compliance and performance audits; weaknesses that prevent effective auditing of public debt include narrow mandates, insufficient access to information, and conflicting definitions of public debt.
  - Granting SAIs broad powers and protecting them from undue political pressures would address these challenges.
- Conceptual links:
  - Accountability includes observation, information, and sanctions (comptes à rendre).138,139
  - Transparency should be relevant, accessible, timely, accurate, and retain details necessary for analysis and inquiry; formats should be comprehensible for stakeholders.
- Legislature’s role (para 78–79):
  - International standards recommend Legislature receive an annual report on debt management operations and strategy outcomes.
  - Legislature can:
    - Establish statutory scheme for public debt management prescribing objectives and specifying roles/responsibilities.
    - Approve borrowing operations (set annual borrowing ceilings and/or ratify/sign individual loan agreements); ratification powers may be limited (approve/reject only).141
    - Oversee debt and debt management through all phases of budget cycle:
      - Budget formulation: scrutinize pre-budget statements, macro projections, debt management strategy, fiscal risks and contingent liabilities (examples: Australia, Austria, Nigeria, New Zealand, South Africa).
      - Annual budget approval: scrutinize debt limits, granular composition of debt stock (Ghana), and debt sustainability analysis (Federation of Bosnia and Herzegovina).
      - Budget execution: receive regular reports on debt management and debt stock (Mexico).
      - Ex-post oversight: examine end-year budget execution reports, annual financial statements, separate annual debt management reports assessing conformity to medium-term strategy and reasons for variance.

*IMF Working Paper — The Legal Foundations of Public Debt Transparency: Aligning the Law with Good Practices*

### 80.   Legal authority does not ensure in itself proper scrutiny. The law is necessary but not sufficient. To

### wpiea2024029-print-pdf - 80.   Legal authority does not ensure in itself proper scrutiny. The law is necessary but not sufficient. To

### Legislature oversight and transaction-level scrutiny
- Legal authority alone is necessary but not sufficient for proper scrutiny; the Legislature must have sound processes, institutions, and staff with technical capacity (80).
- Committee structures (finance, budget, economic committees) enable specialization and deeper scrutiny; example: U.S. law requires the Secretary of the Treasury to send the annual public debt report to two specific committees—the House Committee on Ways and Means and the Senate Committee on Finance (80, 143).  
- Two considerations important for today’s debt-transparency challenges: the Legislature’s role in transaction-level approvals and access to confidential information (81).
- Good practices for legislative oversight (81):
  - Balance efficiency and accountability for transaction-level approvals: legislative approval of external loan transactions can ensure Executive accountability and verification of rigorous economic analysis during planning, allocation, and implementation phases of the public investment framework (81, 144). Some jurisdictions opt for ex-post oversight to avoid delays (81).
  - Ensure confidential debt information is not exempt from legislative oversight: legislative committees should review debt information classified as confidential or restricted through closed or special hearings (examples: Kenya, Uganda, US, Zimbabwe) (81).

### State Audit Institutions (SAIs): mandate, powers, and audit types
- Role and mandate (82–85):
  - SAIs, external to the executive, have a core mandate to review the effectiveness and proper use of public resources and play a fundamental role in supporting disclosure of sovereign debt through clear, objective, factual audit reports (82).
  - SAIs employ financial, compliance, and performance audits in the context of public debt. Financial audits cover operational reports, statistical reports, reconciliation reports accompanying financial statements, and reports related to budget preparation (83).
  - Compliance audits assess consistency with legal and regulatory provisions, whether borrowing operations followed prescribed procedures and authorizations, and whether non-disclosure agreements or clauses are consistent with law and regulation (83, 146–147).
  - Performance audits focus on improving government processes on public debt but remain less used despite international support; traditional financial and compliance audits are likely to reveal inconsistencies that bring undisclosed debt to light (83).
  - SAIs should enjoy a broad mandate to audit public debt and debt management operations; authority may be set forth in constitutions, enabling legislation, or derive from general powers to audit government financial statements (84, 149). Annex XII includes country examples of statutory mandates and related powers of SAIs (84).
- Institutional coverage and expansion (85):
  - A narrow institutional coverage (e.g., authorization to audit only central government finances) can hamper debt transparency; SAIs should have broad coverage including central government, subnational government, and public corporations (85). Examples: Namibia (limited to “state revenue fund”), Italy and Argentina (broad coverage) (85, 150).
  - Expanding SAI coverage should avoid weakening the institution where resources and technical capacity are insufficient; SAI authority over public debt can expand over time (85). Example: Philippine Commission on Audit post-audit powers expanded under Article IX-D of the Constitution of 1987 (85, 151).
- Powers and access to information (86–87):
  - Key legal powers for effective SAI function include:
    - the power to obtain information (Principle 3 of the Mexico Declaration) extended to information held by third-party entities outside the public sector, complemented by penalties for refusals or the ability to report refusals to the legislature (examples: Indonesia, Namibia) (86);
    - the power to report or obligation to disclose audit results (Principles 5 and 6 of the Mexico Declaration); absent these powers, legal restraints on publication can hinder debt transparency (86).
  - Compliance audits should enable SAIs to examine non-disclosure agreements and request documents notwithstanding confidentiality clauses, based on the SAI’s mandate (83, 146).
  - Mandatory duties to specifically audit public debt, enshrined in law, can protect SAIs from undue political pressure and insulate them from pressure not to audit or to audit less controversial entities (87).
  - Legal provisions may limit publication rights; example: Mozambique’s enabling law specifies the SAI may publish the final decision after appeals but is not obligated by law to publish the full audit report or a summary (87, 152).

### Conclusions: costs of opaque debt, implementation gaps, and priority reforms
- Costs and risks of hidden/undisclosed/opaque debt (88):
  - Undisclosed debt can undermine debt sustainability and investor confidence, increase borrowing costs, prevent proper risk assessment by borrowers and creditors, complicate debt restructuring, and, when exposed, shock an economy—harming ordinary people through weakened currency, spiraling inflation, and austerity (88).
  - Opaque debt collapses accountability and increases corruption risk (88).
- Implementation gaps despite international standards (89–90):
  - International standards and initiatives exist (public debt management, fiscal transparency, statistical reporting; voluntary initiatives such as G20 Operational Guidelines on Sustainable Financing and IFF Voluntary Principles for Debt Transparency) but critical implementation gaps remain, particularly in LICDs and EMs (89).
  - Urgent challenges include limited coverage of debt reporting, underreporting by local governments, EBFs, SSIs, SOEs, and misreporting on complex debt instruments (89).
  - Domestic legal frameworks often inadequately implement standards: coverage limited to government securities and loans (excluding complex instruments such as supplier credit agreements, accounts payable), misalignment with international accounting/statistical practices, scarce reporting/dissemination requirements, absence of loan-level disclosure requirements, weak borrowing frameworks for entities outside central government, unclear delegation of borrowing powers, fragmented institutional arrangements for debt data collection and disclosure, and absence of proper monitoring and oversight (90).
- Priority legal-reform areas to promote debt transparency (91):
  - ensuring consistency and clarity in the legal concept of public debt;
  - providing a clear authorization to borrow, and a clear delegation process;
  - enhancing institutional arrangements for debt monitoring and management;
  - ensuring the law regulates narrow exceptions to disclosure and provides clear guidance on the conditions and scope of confidentiality, as well as parliamentary oversight;
  - strengthening the oversight role of the legislature over public debt disclosure and proper scrutiny by independent institutions such as SAIs.
- Sequencing and tailoring of reforms (92):
  - Legal reform is time-consuming and complex; reforms should be tailored to country-specific circumstances, garner political support, determine scope and ambition, and sequence implementation to address resource constraints and gradually develop institutional capacities (92).
  - Where legal reform is not feasible short-term, pragmatic use of secondary legislation may be appropriate where existing laws permit; some areas may be strengthened by executive action (broadening debt disclosure requirements, strengthening institutional frameworks for debt compilation/recording/dissemination, adopting policies for monitoring/regulating confidentiality agreements), while others likely require legislative fixes (clarifying legal definition of public debt, enhancing borrowing authorization frameworks, tightly defining exceptions to disclosure and scope of confidentiality agreements) (92).
- IMF role and capacity development (93):
  - The IMF will continue fostering debt transparency in collaboration with borrowing countries, creditors, international financial institutions, and other stakeholders (93).
  - The IMF promotes international standards and direct dissemination through SDDS, e-GDDS, and SDDS Plus, and its policies support public debt transparency in surveillance and lending contexts (e.g., DLP, MPA, DSA, Lending to Arrears Policy) (93).
  - The Legal Department has increased and broadened capacity development on legal frameworks for public financial and debt management through desk reviews, diagnostic missions, discussions of legal/regulatory/supervisory issues, institution building, and preparation of draft laws, regulations and instruction manuals; focused, well-sequenced and prioritized actions buttressed by political support are essential (93).

*IMF WORKING PAPERS The Legal Foundations of Public Debt Transparency: Aligning the Law with Good Practices*

### Annex I.  List of Countries and Laws Surveyed

### Annex I. List of Countries and Laws Surveyed

### Countries and specific laws analyzed
- 1. Albania - Law on Concessions, State Borrowing, Debt and Guarantees; Organic Budget Law; Law on Entrepreneurs and Companies
- 2. Angola - Public Debt Law
- 3. Antigua & Barbuda - Finance Administration Act; Finance and Audit Act
- 4. Armenia - Public Debt law; Treasury System Law
- 5. Australia - Financial Management and Accountability Act; Charter of Budget honesty Act; Public Governance, Performance and Accountability Act; Auditor General Act
- 6. Austria - Federal Budget Act; Federal Act on Court of Audit
- 7. Azerbaijan - Accounting Law; Law on Budget System; Law on Public Debt
- 8. Bhutan - Audit Act; Public Finance Act
- 9. Bolivia - Law on Public Administration; Executive Resolution on Basic Norms of the Public Debt System
- 10. Brazil - Public Finance Management Law; Fiscal Responsibility Law; Law on Court of Accounts
- 11. Bulgaria - Government Debt Act; Markers in Financial Instruments Act; Public Finance Act
- 12. Cambodia - Law of Public Enterprises; Law on Public Finance System
- 13. Cameroon - Law on the State’s Financial Regime; Public Contracts Code
- 14. Canada - Borrowing Authority Act; Financial Administration Act
- 15. Chile - Public Financial Management Law; Law on Fiscal Responsibility
- 16. Colombia - Fiscal Responsibility Law; Organic Budget Law
- 17. Ethiopia - Financial Administration Act
- 18. France - Organic Budget Law; Commercial Code
- 19. Georgia - Budget Code; Law on Entrepreneurs; Law on Public Debt; Law on Public Internal Financial Control
- 20. Ghana - Public Financial Management Act
- 21. Indonesia - Law on State Finance; Act Concerning State Treasury
- 22. Italy - Budget Law
- 23. Jamaica - Public Debt Management Act; Financial administration and Audit Act
- 24. Kenya - Public Finance Management Act
- 25. Korea - National Finance Act; National Accounting Act
- 26. Lao P.D.R. - Law on Public Debt Management
- 27. Liberia - Public Finance Management Act
- 28. Lithuania - Law on State Debt
- 29. Malawi - Public Finance Management Act
- 30. Mauritius - Public Debt Management Act; Finance and Audit Act
- 31. Mexico - Fiscal Responsibility Law; Public Debt Law; Transparency and Access to Information Law
- 32. Moldova - Law on Public Finance and Budgetary and Fiscal Responsibilities; Law on Public Sector Debt, State Guarantees and State Credit
- 33. Mongolia - Law about Debt Management; Budget Stability law; Budget Sustainability Law
- 34. Morocco - Organic Finance Law
- 35. Mozambique - Law on Public Debt and State Guarantees
- 36. Nepal - Loan and Guarantees Act; Public Debt Act
- 37. New Zealand - Public Finance Act; State Owned Enterprises Act
- 38. Nigeria - Fiscal Responsibility Act
- 39. North Macedonia - Public Debt Law
- 40. Pakistan - Public Finance Management Act; Fiscal Responsibility and Debt Limitation Act
- 41. Peru - Law on National Debt System
- 42. Poland - Public Finance Act
- 43. Rwanda - Organic Law on State Finance and Property
- 44. Senegal - Organic Finance Law
- 45. Serbia - Public Debt Law
- 46. Seychelles - Public Debt Management Act
- 47. Sierra Leone - Public Debt Management Act; Government Budgeting and Accountability Act
- 48. Somalia - Public Financial Management Act
- 49. South Africa - Public Finance Management Act
- 50. Spain - Organic Law on Budgetary Stability and Financial Sustainability; Law on Transparency and Access to Public Information
- 51. Sweden - Budget Act
- 52. Switzerland - Financial Budget Act
- 53. Thailand - Public Debt Management Act; Budget Procedure Law; Fiscal Responsibility Act
- 54. Timor-Leste - Budget and Financial Management Law; Public Debt Management Law
- 55. Turkey - Law on Regulating Public Finance; Public Finance Management and Control Law
- 56. Uganda - Public Finance Management Act
- 57. United Kingdom - National Loans Act
- 58. Vietnam - Law on Public Debt Management; Law on State Owned Enterprises; Law on Publishing Information about State Owned Enterprises
- 59. Zambia - Loans and Guarantees Authorization Act; Public Finance Management Act
- 60. Zimbabwe - Public Debt Management Act; Public Finance Management Act

*IMF Working Papers — The Legal Foundations of Public Debt Transparency: Aligning the Law with Good Practices (Annex I list of countries and laws surveyed).*

---

### Annex II. Public Sector Legal Classification vs. 2014 GFSM Sectorization

### Major themes and country cases
- Case of Egypt
  - Legal form prevails over economic nature for classification of public sector entities.
  - Economic Authorities (EAs) and Public Business Sector Companies (PBSCs) are classified outside the general government despite some conducting governmental functions with budget support and not performing commercial activities.
  - Fiscal position (asset and liabilities) and associated risks remain disclosed at a very aggregate level.
  - Coverage, quality, and timeliness of fiscal reporting of these entities could be enhanced by reclassification in line with international standards and guidelines, including required legal reform.
  - Current Legal Classification vs. GFSM Sectorization listed categories:
    - Current Legal Classification: General Government; PCs; CG Social Security; Central Government; Local Government; Public Service Authorities; Social Security Entities; Economic Authorities; Public Business Sector Companies; Joint Ventures
    - GFSM Sectorization: (implied comparison to 2014 GFSM sectorization criteria)
  - Footnote references: Egypt legal acts cited (State General Budget Law of 1973; Government Accounting Law of 1981; Public Business Sector Companies Law of 1991; Law governing Public Authorities of 1963) and IBP 2020 Open Budget Survey 2019 Questionnaire: Egypt.

- Case of Mexico
  - Legal classification affects federal budget allocation and dissemination of fiscal statistics.
  - Complex legal institutional set-up complicates centralized compilation and disclosure of a complete picture of public sector liabilities.
  - Fiscal reporting over certain non-parastatal entities (non-organic funds) remains partial despite substantial risk: "net worth is approximately 3 percent of GDP."
  - Prospects for improved sovereign asset-liability management could be achieved by simplifying forms of trust funds and more comprehensive reporting of all parastatal entities.
  - Current Legal Classification vs. GFSM Sectorization illustrated with categories:
    - Current Legal Classification: CG; PCs; BCG; EBFs; Social Security; Financial; No-Financial; Federal Government; Decentralized; Organic Trust Funds; State-Owned Productive Companies; Companies with a Majority State Ownership; Non-Organic Trust Funds
  - Footnote references: IMF 2021 and IMF 2018 reports.

---

### Annex III. Transaction Level Information and Loan Contracts Published — The Case of Mexico

### Transparency Law reporting requirements (quarterly publication on transparency portal)
- Regulations require all public entities to publish and update information related to obligations or loans that constitute public debt (internal and external) under applicable constitutional and legal provisions.
- The following information must be published on a quarterly basis:
  - Criterion 1 Fiscal year
  - Criterion 2 Reporting period
  - Criterion 3 Accredited (obligated subject that contracts the obligation)
  - Criterion 4 Name of the executing agency of the public resource
  - Criterion 5 Type of obligation: Simple credit / Credit in checking account / Stock issue / Guarantee of timely payment (GPO) / Contracts for service provision projects (PPS)
  - Criterion 6 Creditor (Institution that granted the loan)
  - Criterion 7 Date of signature of the contract or legal instrument
  - Criterion 8 Original amount contracted, which appears in the contract or legal instrument in which the obligation was contracted
  - Criterion 9 Interest rate term agreed in the contract or legal instrument
  - Criterion 12 Due date of the debt
  - Criterion 13 Resource affected as a source or guarantee of payment
  - Criterion 14 Destination for which the obligation was contracted
  - Criterion 15 Balance as of the reporting period
  - Criterion 16 Hyperlink to the authorization of the debt proposal that has been presented, if applicable
  - Criterion 17 Hyperlink to the list of negative resolutions to the contracting of financing for entities other than the federal government
  - Criterion 18 Hyperlink to the contract or legal instrument in which the obligation was contracted
  - Criterion 19 Document or instrument in which modifications have been specified
  - Criterion 20 Hyperlink to information on public debt, published by the MoF
  - Criterion 21 Report sent to the MoF that contains the list of all loans and payment obligations
  - Criterion 22 Hyperlink to the Public Account report sent to the MoF or equivalent
  - Criterion 23 Date of registration
- Footnote reference: General Transparency Law and regulations available at Normatividad en Transparencia - Gobernación (gobernacion.gob.mx).

---

### Annex IV. Fiscal Rules’ Reporting Legal Framework — The Case of The Bahamas and Angola

### The Bahamas
- Legal framework and targets
  - The 2018 Fiscal Responsibility Act establishes a long-term objective of reducing central government debt to 50 percent of GDP.
  - The timeframe for achieving this goal has been revised several times, and as of 2021 was postponed to FY2030/31.
  - The law states that debt fiscal objectives are to be expressed as a percentage of GDP and as a nominal debt limit in the Fiscal Strategy Report and are to be included in the Annual Budget.
- Required reports and contents
  - Fiscal Strategy Report
    - Prepared yearly by the Minister of Finance on behalf of the Government.
    - Presented to the Cabinet and then to the Parliament and the Fiscal Responsibility Council.
    - To be published on the day of submission to the Parliament.
    - Includes "level of debt by external source, domestic source and total," and the level of financial and performance guarantees.
  - Pre-election Economic and Fiscal Update
    - Published by the Minister of Finance no later than 20 days before the day of general Parliament elections.
    - Includes information on net and gross debt for the current year and next three years and level of guarantees.
  - Mid-year review
    - Submitted to the Parliament by the Minister of Finance every February and published.
    - Includes net and gross debt for the current year and next three years, as well as level of guarantees.
- Footnote references: The Bahamas Fiscal Responsibility Act 2018 (First Schedule, section 3; First Schedule, section 4; Sections 9 and 10; Second Schedule, Section 5; Section 11 and Third Schedule; Section 12 and Fourth schedule) and IMF Fiscal Rules at a Glance update 1985-2021.

### Angola
- Legal framework and targets
  - The Fiscal Responsibility Law establishes a long-term debt anchor of 60 percent debt-to-GDP ratio.
  - The law envisages detailed in-year and end-year reporting requirements.
- Required reports and contents
  - Medium-Term Debt Management Strategy (MTDS)
    - Introduced to be updated and published at least on a yearly basis (or when there are "significant changes in macroeconomic assumptions").
    - MTDS includes description of the costs and risks of the existing debt portfolio; description of the future environment for debt management, including fiscal and debt projections; and recommended strategy analysis supporting it.
  - Fiscal Strategy Document
    - To be published by the Executive on a yearly basis and updated after six months (the update is also to be published).
    - Should include a declaration of compliance with fiscal rules, including the debt rule, and an explanation of policies and measures taken.
  - Quarterly and annual fiscal reports
    - To be published by the Executive and include information on the execution of, among other things, the debt rule, as well as the breakdown of the relevant variables in accordance with the MTFF, by subsector and consolidated.
  - Five-year evaluation report
    - The Executive must prepare and publish an evaluation report every five years on the adequacy of fiscal rules.
- Implication
  - The reporting framework requires enhanced monitoring of public debt, not only of central government but also of public corporations (within the scope of the debt rule).
- Footnote references: Angola FRL, Articles 11, 12, 13, 17 and 18.

*IMF Working Papers — The Legal Foundations of Public Debt Transparency: Aligning the Law with Good Practices (Annexes II–IV).*

### Annex V. International Standards, Guidelines and

### Annex V. International Standards, Guidelines and Jurisdictional Examples on SOE Debt Reporting

### Public Sector Debt Statistics—Guide for Compilers and Users (PSDS)
- Chapter Five: Public Corporations’ debt should be reported and presented separately from general government debt.
- All public sector debt tables should indicate the institutional coverage, which depends on data availability and analytical needs.
- Countries may not have the information available to compile the presentation tables for all the subsectors of the public sector and data should be compiled on a best-efforts basis and according to country circumstances.
- Information collection on SOE debt:
  - at the individual instrument level for the larger corporations;
  - via surveys for smaller ones.

### Fiscal Transparency Code
- Fiscal reports should provide a comprehensive, relevant, timely, and reliable overview of the government’s financial position and performance and of the fiscal activities of the public sector and its subsectors (one of which is the public corporations subsector—SOEs) according to international standards and guidelines, including all entities engaged in public activities.
- Reporting on the entire public sector (which would include public corporations) is recommended under the more advanced transparency practices of the Code.
- The government should regularly publish comprehensive information on the financial performance of public corporations.
- Footnote: Fiscal Reports are defined in the Code as: Retrospective reports on fiscal developments including in-year and year-end budget outturn/execution reports, fiscal statistics, and annual financial statements.

### European Union
- With the adoption of the Enhanced Economic Governance Package (the "six-pack") in 2011 EU member states are required to publish relevant information on contingent liabilities with potentially large impacts on public budgets, including liabilities stemming from the operation of public corporations and their extent.
- Data disclosure is in aggregate form and covers government-controlled units reporting liabilities higher than 0.01 percent of GDP in the sectors of non-financial corporations and financial corporations.
- The new data collection represents a step towards further transparency of public finances in the EU by giving a more comprehensive picture of EU Member States’ financial positions.
- Footnote: Council Directive 2011/85 on requirements for budgetary frameworks of the Member States.

### OECD Guidelines on Corporate Governance of SOEs
- The Guidelines recommend SOEs should observe high standards of transparency and be subject to the same high-quality accounting, disclosure, compliance and auditing standards as listed companies.
- SOEs should report material financial and non-financial information in line with high quality internationally recognized standards of corporate disclosure, including areas of significant concern for the state as an owner and the general public.
- Annotations to the Guidelines explain:
  - when deciding on reporting and disclosure requirements for SOEs, consider enterprise size and commercial orientation;
  - where SOEs are large or where state ownership is motivated primarily by public policy objectives, those enterprises should implement particularly high standards of transparency and disclosure;
  - a high level of disclosure is particularly important when SOEs have a significant impact on the state budget or on the risks carried by the state.
- The Guidelines recommend governments, as owners, should:
  - develop consistent reporting on SOEs;
  - publish annually an aggregate report on SOEs focusing primarily on financial performance and the value of the SOEs, but also including performance related to key non-financial indicators.
- The aggregate report should provide key financial indicators including turnover, profit, cash flow from operating activities, gross investment, return on equity, equity/asset ratio and dividends.
- Good practice calls for the use of web-based communications to facilitate access by the general public.

### International Organization of Securities Commissions (IOSCO)
- Principle 16: “there should be full, accurate and timely disclosure of financial results, risk and other information which is material to investors’ decisions”.
  - This includes disclosure to investors of current and reliable information necessary to make informed investment decisions on an ongoing basis and may pertain to specified transactions, periodic reports and ongoing disclosure and reporting of material developments.
- Principle 18: “accounting standards used by issuers to prepare financial statements should be of a high and internationally acceptable quality.”
- Principles for Periodic Disclosure by Listed Entities:
  - Annual report—At a minimum, listed companies should be required to provide audited financial statements according to high quality internationally accepted accounting standards that cover the entire prior financial year in their annual reports.
    - The audit report must be given by an independent audit firm that is subject to oversight by a body that acts and is seen to act in the public interest.
    - The annual report should identify significant changes reflecting all material events that could have an impact on an investor’s decision making.
    - Recommended debt-related disclosure example: the level of borrowings at the end of the period covered by the financial statements and the characteristics and maturity profile of borrowings.
  - Interim periodic reports—should contain information that will enable investors to track the performance of a company over regular intervals and provide sufficient financial information to enable investors to assess the current financial status of a company.
  - Information characteristics—information in periodic reports should be timely; the size of the issuer may be taken into consideration when establishing due dates; information should be clear, concise, without reliance on boilerplate language and stored to facilitate public access.
- Principles for Ongoing Disclosure and Material Development Reporting by Listed Entities:
  - Listed entities should have an ongoing disclosure obligation requiring revelation of all information that would be material to an investor’s investment decision.
  - Implementation can be by (i) a comprehensive list of prescribed disclosure items that are presumptively material or (ii) a general obligation to disclose all information that may affect an investor's assessment, with some jurisdictions indicating a list of events that typically can be considered material.

### International Financial Reporting Standards (IFRS) and Related Standards
- Conceptual Framework for Financial Reporting—The objective of general-purpose financial reporting is to provide financial information about the reporting entity that is useful to existing and potential investors, lenders and other creditors in making decisions relating to providing resources to the entity.
- Specific standards addressing borrowing-related information disclosures:
  - IFRS 7: Financial Instruments Disclosures—requires disclosures enabling users to evaluate:
    - (i) the significance of financial instruments for the entity’s financial position and performance; and
    - (ii) the nature and extent of risks arising from financial instruments to which the entity is exposed and how the entity manages those risks.
    - Relevant required debt-related disclosures include:
      - Balance sheet: the carrying amount of financial instruments by category either on the face of the balance sheet or in the notes.
      - Financial liabilities at fair value through profit or loss: for loans and liabilities designated at fair value through profit or loss, the change in fair value that is attributable to credit risk and how that amount is determined.
      - Income statement: the net gains/net losses for each of the categories of financial liabilities as well as total interest expense.
      - Disclosures in respect of any accepted and pledged collateral.
      - Defaults of principal/interest in respect of loans payable and any other breaches of loan agreements that permit the lender to demand repayment.
  - IFRS 9: Financial Instruments—Establishes principles for financial reporting of financial liabilities so users can assess the amounts, timing and uncertainty of an entity’s future cash flows; requires recognition of a financial liability when an entity becomes party to the contractual provisions of the instrument.
  - IAS 24: Related Party Disclosures—Government controlled entities shall disclose transactions with the government, specifying the name of the government and the nature of its relationship with the reporting entity (i.e. control, joint control or significant influence) and the nature and amount of each individually significant transaction in sufficient detail to enable users to understand the effect of related party transactions on financial statements.
  - IAS 37: Provisions, contingent liabilities—A contingent liability is not recognized in the statement of financial position; unless the possibility of an outflow of economic resources is remote, a contingent liability is disclosed in the notes.

*Annex V. International Standards, Guidelines and Jurisdictional Examples on SOE Debt Reporting — IMF Working Paper excerpt.*

### Annex VI. Main Debt-Related Disclosure Requirements for Listed

### Annex VI. Main Debt-Related Disclosure Requirements for Listed Companies—Selected Jurisdictions

### Disclosure requirements matrix (A, B, C, D, E) — summary of obligations
- A: Required regardless of materiality.
- B: Required only if materially relevant.
- C: Debt information specifically considered material.
- D: Disclosure of granular information on each borrowing operation is required.
- E: Required when issuer grants guarantee/collateral or required in case of issuer default or breach (as indicated per jurisdiction).

### Key cross-jurisdictional observations from the table
- Australia: A marked as X; other columns blank. Observation: "No No" under guarantees/default columns.
- Brazil: A marked X; C marked X; observation: "Yes No".
- China: A, B, C, D marked X; E marked "Yes" and a separate note "No*". Detailed requirements:
  - "Level of indebtedness including: sum of current and non-current liabilities, debt ratio (current plus non-current liabilities, divided by equity) and any other indebtedness index (per issuer’s choice) indicating: the method used to calculate the index and an explanation of why this index is appropriate for the correct understanding of the financial situation and the level of indebtedness"
  - "For guarantees: indication of the amount of the issuer's obligations according to different maturity periods (less than a year, between 1 and 3 years, between 3 and 5 years and longer than 5 years)."
  - Annual reports: disclose major contracts, including guarantees, specifying the amount and period and the object of the guarantee.
  - For external guarantees: disclose amount and balance of external guarantees, as well as amount and balance of guarantees granted to its subsidiaries.
  - Specific thresholds/conditions: list balance of guarantees to shareholders, actual controller and associated parties whose asset-liability ratio is 70 percent or more, and the part of the money which exceeds 50 percent of the company’s net assets.
  - Shanghai SE: additional granularity for issuers that guarantee transactions; obligations to specify amount, payment method, terms, conditions precedent, effective date and term, special clauses, include copy of agreement, description, relatedness, counterparty, name, book value, valuation and mortgage/pledge status.
  - Note: "*Granularity provided for only for issuers in the Shanghai SE that guarantee transactions."
- Colombia: A and D marked X; E marked "Yes" and a footnote X* for D. Detailed requirement: disclose on agreements giving rise to material financial obligations the date of initiation, brief description, amount, terms and form of payment, clauses that may accelerate payments or increase obligation, recourse mechanisms, and other material terms. Footnote: "*Events that result in the acceleration of its direct financial obligations or those of its subsidiaries, including the date of the event and a brief description of the operation, the amount of the accelerated obligation and the terms of payment and any other material obligation that can arise as result of the acceleration."
- European Union: B marked X*; observation: "No No". Note: "*As part of half yearly reports, not of ongoing reporting requirements." Requirement: disclose any changes in rights of holders of securities including changes in loan terms or interest rates that could indirectly affect those rights.
- France: C marked X; observation: "No No". Requirement: "A state of guarantees and collaterals granted by the company."
- Ghana: A marked X* and C marked X. Note: "* Only if the directors consider it material." Observation: "No No".
- Hong Kong: A marked X*, C marked X, D marked X, E marked "Yes" and an additional note "No**". Detailed items:
  - Must disclose breach of loan agreements for loans significant to operations.
  - Guarantees to affiliates that exceed 8 percent of the assets ratio: must disclose operation, value, banking arrangements, terms including interest rate, method of repayment, maturity date, and any security.
  - Percentage ratio disclosures: where any percentage ratio (assets, profits, revenue, consideration, equity capital) is more than 5 percent and less than 25 percent, must disclose identity and principal business activities of parties, date, value, reasons and expected benefits.
  - Initial listing and annual report disclosure requirements specified (total debt securities, term loans, contingent liabilities; directors’ comment on borrowings, maturity profile, capital structure, currency and interest rate structure).
  - Other: disclosure required where loan agreement imposes specific performance obligations on controlling shareholder that, if breached, would cause default — must disclose aggregate level of affected facilities, life of the facility, specific performance obligation imposed.
  - Footnote: "No**" — context indicates limit/exceptions.
- India: A marked X and D marked X; observation: "Yes No*". Requirement: listed companies borrowing from banks/financial institutions must disclose any event of default including nature of obligation, name of lender, date of default and current default amount, total principal amount, tenure, interest rate and whether secured. Footnote: "*Disclosure granularity only provided for events of default."
- Mexico: A, B, C marked X; observation: "No No". Specific disclosures when sum of loans equals or exceeds 5 percent of total assets liabilities and consolidated capital of issuer, and other material events (amendment of collateral, restructures/amortizations, breaches of payment, granting of loans representing significant consolidated capital).
- Nigeria: A marked X* and C marked X; observation: "Yes Yes**". Notes:
  - "*Company’s capital structure, including borrowings and maturity dates"
  - For wholly owned SOEs: issuance of debt through the stock exchange requires publishing notice in official Gazette including beneficiary, amount, mode, interest rate, payment timing, and other necessary information.
  - "**Only for listed SOEs."
- Philippines: A and D and C marked X; observation: "Yes No". Requirements:
  - Annual report: (i) long term debt information including type, amount, interest rates, number of periodic installments and maturity dates; (ii) guarantees given to other issuers—guaranteed issuer, total amount guaranteed and outstanding and nature of guarantee.
  - Breach disclosure when indebtedness of issuer or significant subsidiaries exceeds 5 percent of total assets of issuer and consolidated subsidiaries.
  - Quarterly Reports: data aggregated by maturity, type of borrower/creditor, currency, and creditor country, among others.
- Spain: A and B marked X*; observation: "No No". Note: "*Circular 4/2009 contains an indicative list of types of information that could be considered relevant, including debt or convertible warrants operations, the issue, modification, amortization or maturity of financial instruments and the concession, renewal, termination or restructure of loans."
- United States: A marked X and D and E marked "Yes Yes". Requirements (Form 8–K):
  - Item 1.01: material definitive agreements or amendments — disclose date and parties, amount, maturity date, interest rate, collateral description, main terms, conditions and events of default; attach copy of full loan agreement.
  - Item 2.03: direct financial obligation that is material — date, identity of parties, brief description of transaction, amount, terms of payment, terms under which it may be accelerated or increased, other material terms and conditions.

### Selected quantitative thresholds and specific numeric criteria preserved verbatim
- Hong Kong: guarantee threshold "8 percent of the assets ratio".
- Hong Kong: percentage ratio disclosure when "more than 5 percent and less than 25 percent".
- China: asset-liability ratio threshold "70 percent or more" for related parties; amount exceeding "50 percent of the company’s net assets".
- Mexico: disclosure trigger when sum of loans is "equal or greater of 5 percent of total assets liabilities and consolidated capital of the issuer".
- Philippines: breach disclosure threshold "exceeding 5 percent of the total assets of the issuer and its consolidated subsidiaries".
- China: maturity buckets for guarantee obligations: "less than a year, between 1 and 3 years, between 3 and 5 years and longer than 5 years".
- Nigeria (SOE issuance): require notice including "half-yearly and quarterly interest payments" schedule.

### Additional annex highlights (VII–X) — governance and confidentiality examples
- Annex VII — Delegation of borrowing authority (selected country examples):
  - Canada: "The DoF may delegate to any DoF officer any of the powers, duties and functions of the DoF for public debt management."
  - Jamaica: MoF may, "by instrument in writing, authorize any person to sign, issue or execute any document for the purpose of giving effect to an agreement"; authorization shall not prevent the Minister from exercising the function.
  - Rwanda: Minister may delegate powers (except to issue regulations) to Permanent Secretary, Secretary to the Treasury or other public officer; delegation does not divest Minister of accountability; Minister may suspend, change or revoke delegated power or decisions if delegated persons do not fulfill responsibilities appropriately.
  - Zambia: MoF may, "by statutory order, delegate to such public officer as may be specified in the order the performance of any function conferred upon the Minister under the PDM Act, except the power to make statutory instruments."
  - Ghana: "Delegation of the power to raise loans is prohibited."
- Annex VIII — Direct controls of subnational borrowing (selected country examples):
  - Ghana: local government authority may borrow funds only (a) from within the country, and (b) up to the limit determined by the Minister in consultation with the Minister responsible for Local Government, consistent with medium-term debt strategy and annual borrowing and recovery plan.
  - Kenya: county government may only borrow if national government guarantees the loan and it is approved by Parliament; PFM Act grants authority subject to conditions; thresholds/limits and guarantees set by Parliament.
  - Rwanda: local governments authorized to borrow by means of loans for development projects only in accordance with law establishing sources of finances and property; cannot give/approve securities on general property.
  - Uganda: local government may raise loans and issue guarantees but must seek MoF approval prior to proceeding.
- Annex IX — Well-defined exceptions to full disclosure (country examples):
  - Examples of laws circumscribing classified information: Japan—Act on the Protection of Specially Designated Secrets (Article 3); Poland—Law for the Protection of Classified Information (Article 5); Moldova—State Secrets (Article 5).
  - Declassification criteria/processes: Japan (Article 4), Poland (review at least once every 5 years — Article 6), Moldova (grounds and mechanism to request declassification — Articles 13 and 14).
  - Parliamentary oversight examples: Japan (annual report to Parliament — Article 19); Moldova (Parliament control over legislation and expenditures — Article 28); Poland (report to Parliament’s Special Services Commission — Article 13); Hungary (Law on the Development, Implementation and Financing of the Hungarian Section of the Budapest—Belgrade Railway Reconstruction Project — Article 2).
  - Footnote example: Hungary’s National Assembly granted authority to minister responsible for foreign affairs to decide on access to information for financing of the Hungarian section of the Budapest-Belgrade railway reconstruction project, premised on overriding public interest and protection of foreign policy/economic interests.
- Annex X — Regulating confidentiality in public financial management — approaches and examples:
  - Circumscribing scope: PFM laws enumerate circumstances where expenditure or "economic and fiscal information" may be classified (examples: Kenya’s PFM Regulations; Jamaica’s Financial Administration Act; New Zealand’s Public Finance Act). Sao Tome and Principe: financial information of oil related contracts cannot be exempted from disclosure.
  - Setting conditions: confidentiality tests — Australia’s procurement rules four-pronged "confidentiality test" (i) specific identification; ii) commercial sensitivity; iii) information would cause unreasonable detriment to owner or another party; iv) information provided under understanding of confidentiality. UK Public Contracts Regulations permit withholding where disclosure would "be contrary to public interest" or "prejudice the legitimate commercial interests of a party or prejudice fair competition".
  - Declaring nullity: some laws declare confidentiality clauses null/void if they prevent publication/access (examples: Mining Code of Guinea; Sao Tome and Principe’s Oil Revenue Law).

*IMF WORKING PAPERS — The Legal Foundations of Public Debt Transparency: Aligning the Law with Good Practices*

### Section 101 of the PFM Regulations.

### Section 101 of the PFM Regulations

### Parliamentary scrutiny of confidential information
- U.S. Senate rules (Rule XXVI, paragraph 5(b)) permit hearings to be closed for reasons including national security information and confidential financial or commercial information.
- By law the President of the U.S. is required to keep the Senate Select Committee on Intelligence fully informed of intelligence activities; members of that committee are entitled to access intelligence sources and methods, programs and budgets. The committee generally meets in closed session.
- The presentation of “classified expenditures” as a single line item in the budget is noted as a mechanism to ensure confidentiality of defense and national security matters while preserving legislative oversight.
- Uganda’s PFM Act sets out a procedure for controls and external scrutiny for classified expenditure:
  - References: Sections 24 and 54 of the PFM Act, 2015; Section 24 of the PFM Regulations, 2016.
  - Accounting officers must establish appropriate systems of internal control for transactions categorized as classified expenditure.
  - Accounting officers must submit financial statements that properly account for such expenditures to the Minister of Finance, the Accountant General and the Auditor General, who shall examine and audit these statements.
- Kenya’s PFM Regulations provide that accounting officers can be required to disclose information or any other document on the nature of confidential information to a Parliamentary committee.
  - Reference: Section 101.7 of the PFM Regulations.
- Zimbabwe’s PFM Act recognizes risks to the national interest from certain disclosures of government guarantees but provides a process for Parliamentary oversight:
  - The Public Accounts Committee receives disclosures, with a stipulation that written leave of the Minister shall be required in case of disclosure by the Committee or any of its members.
  - Reference: Section 71.2 of the PFM Act.
- Sao Tome and Principe: allows exemptions on the basis of proprietary information to the extent confidentiality is protected by national law, treaty, or some other form of international law (Article 20.2) but states that financial information are not exempted (Article 20.3).

### Statutory mandate and related powers of Supreme Audit Institutions (SAIs) — country examples
- European Court of Auditors
  - Article 287 of TFEU: “The Court of Auditors shall examine the accounts of all revenue and expenditure of the Union. It shall also examine the accounts of all revenue and expenditure of all bodies, offices, or agencies set up by the Union in so far as the relevant constituent instrument does not preclude such examination.”
- Brazil — Federal Court of Accounts
  - 1988 Federal Constitution Art.71: External control under the responsibility of the National Congress, with responsibilities including appraisal of accounts rendered annually by the President of the Republic by means of a prior opinion to be prepared within sixty days of receipt; inspections and audits on an accounting, financial, budgetary, operational and property nature in administrative units of the Legislative, Executive and Judiciary.
  - Organic Law of the Court of Accounts Art.1 and Art.36: responsibilities and requirement to prepare a prior opinion within sixty days from receipt.
  - Article 59 of the Fiscal Responsibility Law (paragraph I, subsection III): courts of audit will alert the Powers when they verify that the amount of consolidated and securities debts, of the credit operation and concession of warranties are above 90 percent (ninety per cent) of the respective limits.
- Auditor-General of Namibia
  - Namibian Constitution Article 127: The Auditor-General shall audit the State Revenue Fund and shall perform all other functions assigned to him or her by the Government or by Act of Parliament and shall report annually to the National Assembly thereon.
  - State Finance Act 31 of 1991 Section 25. (1) The Auditor-General shall-(a) subject to the provisions of subsection (3), investigate, examine and audit-(i) the account-books, accounts and registers referred to in section 4; (ii) the statements and accounts referred to in sections 12 and 13; (iii) any other account-books, accounts and registers prescribed under section 24;
  - Section 12 (b) requires a statement setting out-(i) the total debt as a charge to the State Revenue Fund; (ii) the amount of such debt incurred and redeemed during the financial year; (iii) the interest paid in respect of all such debt; and (iv) the expenditure incurred in connection with such debt; and (c) a statement setting out the revenue received under the different heads of revenue shown in the estimate of revenue; (d) such other statements and accounts as the Auditor-General may require after consultation with the Permanent Secretary: Finance.
- Accounting Chamber of Ukraine
  - Constitution of Ukraine Article 98: The Accounting Chamber shall, on behalf of the Verkhovna Rada of Ukraine, exercise the control over the revenues of the State Budget of Ukraine and the use thereof. The organization, powers and operational procedures for the Accounting Chamber are determined by the law.
  - The Chamber of Accounting Act of 1996 and as amended in 2015: provided authority to conduct both financial and performance audits on “operations to internal and external public debt, government guarantees servicing and repayment of public and publicly guaranteed debt.”
  - Reference: Article 7 of the Law on the Chamber of Accounting of 2015.

### U.S. GAO’s accumulated audit authority over public debt reports
- GAO’s mandate developed over a century beginning with the Budget and Accounting Act, 1921; its general authority is now found in 31 U.S.C. §712: “The Comptroller General shall-(1) investigate all matters related to the receipt, disbursement, and use of public money”.
- GAO’s authority is interpreted to encompass public debt (debt transactions, activities, documents, and information related to debt).
- Specific authorities include:
  - 31 U.S.C. 717(b): The Comptroller General shall evaluate the results of a program or activity the Government carries out under existing law—(1) on the initiative of the Comptroller General; (2) when either House of Congress orders an evaluation; or (3) when a committee of Congress with jurisdiction over the program or activity requests the evaluation.
  - 31 U.S.C. § 716(a): requires each agency to give GAO “such agency records as the Comptroller General requires to discharge [his or her] duties ... (including audit, evaluation, and investigative duties)”
- GAO audits the Federal Consolidated Financial Statements since FY 1997 implementing the Government Management Reform Act of 1994.
- By statute GAO audits Fiscal Service’s Schedules of Federal Debt annually to determine whether, in all material respects, (1) the schedules are fairly presented and (2) Fiscal Service management maintained effective internal control over financial reporting relevant to the Schedule of Federal Debt.
- Additional legislation expanding GAO authority is noted: GAO Access and Oversight Act of 2017 and the CARES Act, Pub. L. 116-136, div B, title IX § 19010, Mar. 27, 2020, 134 Stat. 579, as amended by the Consolidated Appropriations Act, 2021, Pub. L. 116–260, div. N, title II, § 282, Dec. 27, 2020, 134 Stat. 1984.

*Source: wpiea2024029-print-pdf - Section 101 of the PFM Regulations.*

### 2019. https://www.iif.com/Publications/ID/3387/Voluntary-Principles-For-Debt-Transparency

### The Legal Foundations of Public Debt Transparency: Aligning the Law with Good Practices

### Referenced institutions and stakeholders
- Institute for International Finance (IIF): “IIF Voluntary Principles for Debt Transparency-Implementation Note,” Last modified January 13, 2022.
- Inter-American Commission on Human Rights: Declaration of Principles on Freedom of Expression, 2000.
- International Budget Partnership (IBP): Open Budget Survey 2019 Questionnaire: Egypt. Accessed December 7, 2022.
- International Institute for Sustainable Development: UNESCO Finds 125 Countries Provide for Access to Information, 2019. Accessed December 5, 2022.
- International Monetary Fund (IMF): multiple publications (see detailed listings below).
- INTOSAI / INTOSAI Development Initiative: Audit of Public Debt Management: A Handbook for Supreme Audit Institutions.
- Inter-Parliamentary Union: Parliamentary Oversight of International Loan Agreements & Related Processes, 2013.
- OECD: “Debt Transparency” and corporate governance guidance for SOEs (2009; 2015; 2020).
- Paris Club: Comprehensive Data on Its Claims as of 31 December 2021.
- National legislature example: Parliament of Ghana, Record of Loans, Conventions, Treaties and Other Agreements, 2021.
- World Bank and World Bank Group: multiple works on public debt transparency and SOE governance.
- Bretton Woods Committee: “Debt Transparency: The Essential Starting Point for Successful Reform,” 2022.
- United Nations and related bodies: UNESCO; UNCTAD “Principles on Promoting Responsible Sovereign Lending and Borrowing” (2012); United Nations Economic Commission for Europe (Aarhus Convention, 1998); United Nations Economic and Social Council Commission on Human Rights report E/CN.4/2000/63.

### IMF publications cited (selection with exact titles and identifiers)
- IMF. 2003, “Assessing Public Sector Borrowing Collateralized on Future Flow Receivables,” June.
- IMF. 2007, “Guide on Resource Revenue Transparency.”
- IMF. 2014, “Public Sector Debt Statistics Guide.”
- IMF. 2014, “Government Finance Statistics Manual.”
- IMF. 2014, “Revised Guidelines for Public Debt Management.”
- IMF. 2018a, “G20 Notes on Strengthening Public Debt Transparency.”
- IMF. 2018b, “Mexico: Fiscal Transparency Evaluation,” Country Report No. 2018/289.
- IMF. 2018c, “Guidance Note on the Bank-Fund Debt Sustainability Framework for Low Income Countries.”
- IMF. 2019a, Fiscal Transparency Code.
- IMF. 2019b, “Ukraine: Technical Assistance Report–Strengthening Public Financial Management,” Country Report No. 2019/355.
- IMF. 2019c, “G20 Operational Guidelines for Sustainable Financing–Diagnostic Tool.”
- IMF. 2020, Fiscal Monitor: State-Owned Enterprises: The Other Government, April.
- IMF. 2020a, “The Evolution of Public Debt Vulnerabilities in Lower-Income Economies,” IMF Policy Paper No. 20/003.
- IMF. 2020b, “Public Sector Debt Definitions and Reporting in Low-Income Developing Countries,” IMF Policy Paper 2020/005.
- IMF. 2020c, “Collateralized Transactions: Key Considerations for Public Lenders and Borrowers,” IMF Policy Paper No. 2020/010.
- IMF. 2020d, “Update on the Joint IMF-WB Multipronged Approach to Address Debt Vulnerabilities,” IMF Policy Paper No. 2020/066.
- IMF. 2020e, “The International Architecture for Resolving Sovereign Debt Involving Private-Sector Creditors—Recent Developments, Challenges, and Reform Options,” IMF Policy Paper No. 2020/043.
- IMF. 2020f, “Collateralized Transactions: Key Considerations for Public Lenders and Borrowers.”
- IMF. 2021a, “Mexico: Technical Assistance Report – Strengthening Public Assets and Liabilities Management,” Country Report No. 2021/261.
- IMF. 2021b, “Guidance Note on Implementing the Debt Limits Policy in Fund Supported Programs.”
- IMF. 2022a, “Staff Guidance Note on the Sovereign Risk and Debt Sustainability Framework for Market Access Countries.”
- IMF. 2022b, “Reviews of the Fund’s Sovereign Arrears Policies and Perimeter.”
- IMF. 2022c, “Tenth Review of the International Monetary Fund’s Data Standards Initiatives.”
- IMF. 2023, “Making Public Debt Public—Ongoing Initiatives and Reform Options,” IMF Policy Paper No. 2023/034.
- Other IMF working papers and discussion papers referenced, including Proite (2020) Discussion Paper No. 18.

### Thematic coverage and recurring topics in the cited literature
- Debt transparency and public debt reporting practices.
- Public sector debt statistics and definitions.
- Collateralized transactions and future-flow receivables.
- State-Owned Enterprises (SOEs): governance, disclosure, and their role in public debt.
- Resource revenue transparency and resource-backed loans.
- Sovereign debt architecture, including resolution involving private creditors and arrears policies.
- Institutional frameworks: parliamentary oversight, audit (SAIs/INTOSAI), and sovereign investor relations.
- Data standards, debt recording/monitoring back-office organization, and technical assistance for public financial management.
- Human rights and access to information as it relates to transparency (freedom of expression, access to information laws).

### Geographic and sectoral coverage evident from references
- Country-specific work: Mexico, Ukraine, Egypt, Ghana, Uganda.
- Regional and sectoral studies: Africa (debt transparency, accountability, and reporting), South America (regionalism and development), extractive industries contracts and resource-backed lending.
- Global initiatives and standards: G20 notes and operational guidelines; OECD, Paris Club, UN, Bretton Woods discourse.

### Methodological and policy-oriented contributions in the bibliography
- Diagnostic tools, guidance notes, and handbooks addressing:
  - Recording, monitoring, and reporting public debt (Proite, IMF Discussion Paper No. 18).
  - Strengthening public debt transaction disclosure practices (Maslen and Aslan, 2022).
  - Debt reporting heat maps and transparency assessments (World Bank Group, 2022).
  - Fiscal transparency codes and debt management guidelines (IMF 2019a; IMF 2014 Revised Guidelines).
- Emphasis on legal and institutional alignment to implement good practices in public debt transparency, as reflected by the range of legal surveys, conventions, and governance toolkits cited.

*Source: Excerpted references and bibliographic listings from the content unit "The Legal Foundations of Public Debt Transparency: Aligning the Law with Good Practices."*

---


_Source: https://www.imf.org/-/media/files/publications/wp/2024/english/wpiea2024029-print-pdf.pdf_