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?