In this guest post, Erin Houlihan, Senior Program Director with the National Democratic Institute, reviews the relationship between confidentiality clauses and hidden debt, and highlights insights and recommendations from the publication. It is drawn from a new brief,developed by Richard Christeland co-published by NDI, OGP and TI, examining the problem of secrecy clauses in sovereign debt agreements and debunking the most common fictions used by lenders and borrowers to justify their use.

The UNCTAD Secretariat calls the current global debt crisis “one the biggest threats to global peace and security and financial stability” facing the world today. By 2030, global public debt is predicted to reach 100 percent of GDP. Unfortunately, the situation is probably worse than the data indicate. 

The problem of hidden debt – meaning debt hidden from both a nation’s citizens and its creditors – is a consistent and “remarkably pervasive” feature of the world’s sovereign debt crisis and one invariably the result of corruption. It is the citizens of borrowing states – mainly Low and Middle Income Countries (LMICs) – who pay the price when the debt is discovered: increased taxes and fewer public services as governments slash social spending on health, education and other public goods to cover borrowing costs. 

In Mozambique, for instance, the revelation of over USD 2bn in hidden debt prompted the IMF to withdraw aid in 2016, triggering a financial crisis, sovereign debt default, and currency collapse. More recently, a 2024 audit in Senegal revealed billions of dollars in hidden debt from the previous government, throwing the country’s governance credibility and financial future into disarray. 

Why is hidden debt so pervasive and what contributes to non-disclosure?

A recent IMF study revealed that contingent liabilities, mostly related to debt taken by state-owned enterprises (SOEs), likely accounts for around 40% of “unidentified” debt, while another 11% is simply “not accounted for”.  Contributing to this is the growing use of confidentiality clauses in sovereign debt agreements. Confidentiality clauses within debt contracts enable both borrowers and lenders to justify hiding loan information from public scrutiny and, in the worst cases, the existence of the debt itself.  

Efforts to increase public debt transparency remain hobbled by a combination of interconnected governance challenges in both borrower and lender countries, including weaknesses in right to information laws, deficiencies in national legal frameworks on public debt management, and ineffective institutional oversight by parliament, supreme audit agencies and other watchdogs. 

Who is most likely to use confidentiality clauses?

Confidentiality clauses are most commonly used by bilateral or private sector lenders and, more exceptionally, by multilateral lenders. Recent AidData reports in 2021 and 2025 found that “Chinese creditors are particularly likely to include expansive confidentiality undertakings” – especially by imposing confidentiality on the borrower. However, the studies also found some form of confidentiality clause in benchmark samples of multilateral creditor contracts (at a rate of 39 percent), and in around one-third of non-Chinese bilateral creditors’ and commercial bank contracts. 

What justifies the use of confidentiality clauses? 

Nothing. There is no justification for confidentiality in public debt contracts because public debt is the public’s debt. Proponents of debt secrecy argue that confidentiality is necessary for a range of reasons: national security concerns, to protect sensitive commercial information, to get better terms, or due to domestic legal constraints operating on one of the parties. 

These explanations, however, misrepresent the issues at play and overlook the often self-interested political and economic incentives facing the parties to the loan. Hidden debt is more easily captured for private interests, used to sustain corrupt practices, or mismanaged for projects with little public value. Confidentiality clauses therefore shield a range of questionable motives and activities, and contribute to evading democratic oversight and accountability mechanisms.

What can be done to increase transparency and accountability?

The publication “Public Debt Confidentiality: Separating Fact from Fiction”, co-developed by the National Democratic Institute, the Open Government Partnership and Transparency International, examines the problem of confidentiality clauses in sovereign debt contracts and debunks the six most common fictions used by lenders and borrowers to justify their use. The brief also proposes a series of recommendations to increase transparency through enhanced legal frameworks and proactive disclosure. As a starting point:

1. Borrower countries should enact legislation mandating full debt transparency and requiring the proactive public disclosure of complete, transaction-level information related to public debt as a condition of validity and enforceability. Such laws should comprehensively define “public debt” and extend coverage to SOEs, local governments and other non-central government agencies. 
2. Borrower country regulations should require the disclosure by default of transaction-level financial and non-financial debt information, definingly only concrete exceptions to disclosure under right-to-information laws in line with General Comment No. 34 of the UN Human Rights Committee and the Tshwane Principles.
3. Access to confidential debt information should be expressly granted to borrower country oversight institutions, including the legislature (parliament) and supreme audit institutions and to the public; no limitation on disclosure should be permitted through debt contract provisions. 
4. Creditor countries should enact and enforce legislation mandating transparency through the disclosure of transaction-level financial and non-financial information to publicly accessible debt databases – both national and international. Creditor country laws should require that the borrower country’s right-to-information and disclosure laws govern debt disclosure obligations, and not the governing (foreign) law of the contract. 
5. A single global debt registry should be established to which both borrowers and lenders disclose loan details. The managing institution should release loan-by-loan data in a rapid and timely manner and not on a consolidated basis, and should require lender reporting for comparison.