OECD Debt Transparency Initiative

Why debt transparency matters ?

The COVID-19 pandemic has prompted a renewed focus on data transparency to better assess debt sustainability, particularly for the world’s poorest and most vulnerable countries. Greater transparency across all debt transactions is important to improve the flow of information, which can in turn facilitate good governance, aid the fight against corruption and can assist borrowers, creditors and the official sector in the ongoing assessment of debt sustainability and reduce the risk of adverse shocks arising as a result of undisclosed central government liabilities.

With the support of the UK government, the OECD has launched the Debt Transparency Initiative (DTI) to operationalise the IIF Voluntary Principles for Debt Transparency to collect, analyse and report on relevant public sector debt data from low-income countries. This will allow any interested stakeholder to benefit from a better understanding of the public sector debt levels and conditions of these vulnerable countries.

Promotion of debt transparency has become an important issue in the international policy community, fostered by several initiatives such as the G20 operational guidelines for sustainable financing, which are widely supported by G20 members.

The G20 has also supported the implementation of the IIF Voluntary Principles during the past two G20 presidencies. The DTI has been supported by official communiques from the G20 Italian Presidency, supporting the implementation of the Institute of International Finance (IIF) Voluntary Principles for Debt Transparency, including on the launch of the OECD portal, and call on all private sector lenders to adhere to the initiative. The Principles have taken on additional meaning since the G20 Debt Service Suspension Initiative (DSSI), which calls on creditors to offer forbearance to eligible countries that request it, has underscored the key role of transparency in sovereign debt markets. Its full operationalisation could help make international coordination and negotiations of debt servicing and suspension fairer and more durable to improve borrowers’ debt sustainability.

The Debt Transparency Initiative is an 18-month pilot programme that seeks to bring together commercial banks and other providers of debt financing to public sector authorities in low-income economies, as well as debt data users for public policy and investment purposes. Providing timely, aggregated data on lending, pricing, and other transaction terms can help better assess levels and terms of sovereign indebtedness in countries that may be more fragile to changes in interest rates, and exogenous shocks that can destabilise countries.

Board structure and process

In July 2021, the OECD launched an advisory board on Debt Transparency which is composed of the IIF, OECD country financial authorities, international financial institutions, private banks, academia and civil society organisations

 

The OECD has created two groups to help support the Initiative:

  • The Debt Data Users Group, which is composed of the IIF and debt analysts from central banks, finance ministries, IFIs, private lenders and asset managers. This Group provides feedback on debt data collection thought testing of the process and feedback on relevant challenges, refinement of the Reporting Template as well as supporting analytical content, including the data platform interface and features.

  • The Advisory Board on Debt Transparency, which is composed of the IIF, participating global banks, key IFIs (BIS, IMF, WB, UN), central banks and finance ministries, civil society organisations, and academia. It was established as an advisory body to the OECD’s Committee on Financial Markets, and while participation does not suggest that members agree with the steps taken or with the Initiative itself, it is a forum meant to provide a broad range of perspectives on the scope of the initiative, to assess challenges and recommend solutions and to provide a preliminary assessment of the debt collection, data gaps, and implications of debt trends. Participating banks that are part of the Advisory Board include: Citibank, Credit Suisse, HSBC, Mitsubishi UFJ, Scotiabank, Standard Chartered and UBS. Of these, Credit Suisse and MUFJ have already submitted relevant data through the portal, while UBS does not currently have any transaction in scope.

In July 2021, the OECD launched the Advisory Board on Debt Transparency, chaired by the UK HM Treasury. The Board discussed potential solutions to facilitate the implementation of the IIF Voluntary Principles for Debt Transparency and the next steps of the initiative.

Following the launch of the test portal, the OECD has begun to receive sample data for in-scope financial transactions from international banks. The OECD Secretariat, with the support of the Advisory Board, will seek to assess the robustness of the data and, with the Committee’s approval, will make transaction specific data available through a progress report to the relevant G20 body, and will begin to make transaction-specific data periodically available on its portal beginning in early 2022.

The OECD is committed to engaging with low-income country borrowers, to inform them of the Initiative and to seek feedback on the debt data collection and findings. The Secretariat hosted a workshop in November with public debt managers from low-income countries as a first step in this direct line of communication.

Collecting transaction specific data on a voluntary basis from banks and other market participants takes time to build momentum and scale up efforts. Therefore, to supplement the debt data collection from lenders and other investors, the OECD will provide aggregated and country-specific trends and descriptive statistics from commercial data providers, as this information is not readily available to the public.

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