Comprehensive and accurate data on the debt of countries borrowing from the World Bank is crucial for sustainable development. This data enables lenders to make informed and sustainable borrowing decisions, facilitating investments in essential social goods like education, healthcare, and infrastructure. It also helps reduce corruption and prevent disruptive debt crises.
Since 1952, the World Bank has been committed to greater debt data transparency by collecting and compiling external debt data through its Debtor Reporting System (DRS). Traditionally, borrower countries have been primarily responsible for debt transparency. However, recent data-sharing exercises between the World Bank and lending countries have shown that collaborating with creditors to verify borrower-reported data can significantly improve debt data quality and transparency.
Where it all began
For most of that time, borrower countries have borne the primary responsibility for debt transparency. And they continue to do so today. However, the most effective way to validate debt data accuracy and close data gaps is by systematically reconciling debtor and creditor records. Recent data-sharing exercises of G7 and Paris Club lending countries to the World Bank have shown that working with creditors to verify details of borrower-reported data can be a game changer when it comes to strengthening the reliability and transparency of debt data.
The World Bank began cooperating with major creditor nations in 2022 to harmonize their records of loans to the world’s poorest nations – those eligible for funding from the International Development Association (IDA) – with the loan information submitted by those borrowers to the DRS.
Eighteen countries participated in that first exercise, which compared 2021 debtor and creditor data. They included all the Group of Seven (G-7) countries plus 11 other members of the Paris Club, an informal group of 22 major creditor countries formed nearly seven decades ago to tackle debt problems in debtor countries.
By all measures, it was a resounding success. About 90 percent of creditor claims on IDA-eligible countries were matched with loan data submitted by a borrowing country to the DRS. The exercise also identified the reasons that borrower and creditor data didn’t always match, primarily because of the lag in recording debt rescheduling and forgiveness. To address this discrepancy, the debt team collaborated with national offices to resolve the reporting issues on both the borrower and creditor sides. This two-pronged approach reduced the overall margin of error between the two sources to approximately 2 percent.
Building on momentum
Building on the success of the 2022 exercise, the World Bank conducted another data-sharing initiative last year, focusing on loan data from 2023.
The results were even stronger than those from the 2021 data. About 94 percent of debt outstanding reported to DRS by the borrowers was matched with creditor claims with less than a 1 percent difference. This result indicates a high degree of accuracy in debt data recorded in the DRS. Of course, the goal is to achieve a near perfect match, with little to no difference between creditor and debtor data.
Counting on more transparency
To get there, the Bank will continue to promote data sharing and reconciliation with support from a wider group of creditors, including G-20 countries, and any other lending nations that want to participate.
Regular data sharing exercises and reconciliation are the most effective way to ensure that debt sustainability analyses are based on a solid account of existing debt obligations. That helps to minimize the risk of debt reaching unsustainable levels and enables debtors and creditors to quickly take appropriate remedial actions when debt crises do occur.
The World Bank long relied almost exclusively on borrowers to get the data lenders need to make informed and prudent loan decisions. But by comparing borrower-provided data with loan details from creditors, the Bank is incrementally improving the accuracy and comprehensiveness of borrowing country debt. In doing so, it is helping to facilitate the new loans that allow development to happen.
For a deeper dive into the 2023 Data Sharing Exercise, read the full report.
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