Disclosing Public Debt Boosts Investor Confidence, Cuts Borrowing Costs

IMF Blog, June 12, 2025

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Public debt is projected to reach nearly 100 percent of global gross domestic product by the end of this decade.
Greater debt transparency builds investor confidence, helps reduce borrowing costs, and strengthens debt sustainability—reducing the risk of shocks that can lead to a debt crisis.
Increasing use of complex and opaque financing (guaranteed, securitized, and collateralized debt linked to public-private partnerships, state-owned enterprises, and pension funds) leaves more debt hidden from policymakers and the public.
Hidden debt, when revealed, can erode confidence in government data and administrative capacity, lead to higher borrowing costs, and, if substantial, put debt sustainability at risk and potentially trigger a debt crisis.
Core principle: “you can’t manage what you can’t see.”

Law is the cornerstone of debt transparency; many national constitutions specify whether the executive or legislature has ultimate authority to borrow.
Laws define who can sign valid loan contracts, whether state resources can be used as collateral, and what counts as public debt.
The IMF Legal Department review found major gaps in 85 countries.
- Fewer than half of the countries surveyed require debt management and fiscal reporting by law, meaning no single government agency may be responsible for managing debt.
- In many cases, the legal definition of public debt is too narrow and excludes SOEs or types of borrowing such as sub-national lending, allowing debt to accumulate off the balance sheet without oversight.
State audit institutions should have the authority to conduct audits on public debt and report them.

New debt instruments and arrangements increase the share of non-transparent and non-marketable debt, particularly in low-income countries and emerging market economies.
Legal frameworks are often inadequate, murky, or poorly implemented.
Strong laws alone are insufficient if not implemented by capable institutions and enforced in practice.
Legal reform can build consensus and transform debt transparency into a long-term public commitment when stakeholders across government, civil society, and international and creditor communities are involved.

Enact laws on public debt management that provide for debt disclosure:
- Define what counts as public debt.
- Specify who can borrow.
- Specify what must be disclosed.
Implement those laws through systems and institutions that enforce legal obligations in practice.
Use legal reform as a bridge to build consensus and alignment among stakeholders, embedding transparency as a durable public commitment.
Ensure state audit institutions have authority to audit and report on public debt.

2023 policy paper, Making Public Debt Public, identified large debt disclosure gaps in low-income countries and emerging market economies and linked gaps to the increasing share of non-marketable and SOE debt.
IMF debt-limit policies now require more detailed disclosure of debt information, including publication of the holders of a country’s public debt.
Article IV consultations have called for a more structured and transparent assessment of data adequacy, including debt data, to inform discussions with authorities and prioritize capacity-development efforts to improve fiscal and public debt transparency frameworks.
The IMF has delivered more than 200 capacity development missions just on debt management in the past two years.
The Legal Department has expanded capacity development through legal reviews, diagnostic missions, advisory support, and drafting of laws and regulations.

Transparency is not only about data collection; it requires legal clarity, institutional accountability, and public trust.
Countries need the right laws followed by strong institutions to implement them to “put their house in order” and reduce the risks associated with hidden public debt.

Source: https://www.imf.org/en/blogs/articles/2025/06/12/disclosing-public-debt-boosts-investor-confidence-cuts-borrowing-costs