The World Bank has called on developing countries to embrace full debt transparency as a means of preventing potential financial crises.
Call for Debt Transparency
In its report, the World Bank advocated for 'radical' transparency aimed at expanding the scope and clarity around new loan disclosures. Axel van Trotsenburg, the bank's senior managing director, emphasized the significance of debt transparency in averting financial challenges, stating: 'When hidden debt surfaces, financing dries up and terms worsen. Radical debt transparency, which makes timely and reliable information accessible, is fundamental to break the cycle.'
Decline in Foreign Investments
The bank also noted that developing countries attracted just $435 billion in foreign direct investment in 2023, marking the lowest level since 2005. High-income countries received only $336 billion, their lowest inflow since 1996. Indermit Gill, the bank's chief economist, analyzed the situation and linked the decrease in foreign investment flows to rising public debt levels.
Importance of Policy Changes
In light of the situation, governments are urged to meet in Seville from June 30 to July 3 to discuss strategies for mobilizing financing to achieve global and national development goals. Suggestions have been made to reduce investment restrictions, as about 50% of new foreign investment measures introduced in developing countries since 2010 have been restrictive. Deputy Chief Economist Ayhan Kose noted that an increase in foreign direct investment is critical for job creation and sustaining economic growth.
The World Bank's call for transparency in debt management underscores the significance of open financial policies for the stable development of nations. Discussions in Seville may lead to a change in direction towards reducing investment barriers.
