policy institutions like the China Development Bank, and private sector lenders). The importance of bilateral non-Paris Club lenders has increased significantly, and China is now the largest official creditor to developing countries (Horn, Reinhart, and Trebesch 2020; G30 2021). The growing number of private creditors and range of financial instruments further complicates debt resolution, although credit enhancements by MDBs could encourage private creditor participation in restructuring (Friedrich-Ebert-Stiftung and Consensus Building Institute 2021).

Lack of debt and investment transparency. The growing diversity of creditors and complexity of debt instruments has been associated with greater uncertainty about the level and composition of debt, as not all creditors are bound by a single set of reporting standards and loan terms are often confidential. In 2019, of the 17 LICs with available data, minimum requirements in debt recording were met by only eight, and monitoring guarantee requirements were met by only four. Due to shortcomings in accuracy, timeliness, coverage, and completeness of debt records, only four of these 17 countries met the minimum requirements for debt reporting and evaluation (Essl et al. 2019; World Bank 2019). Of 59 countries eligible for IDA borrowing, only one-third reported private sector external debt statistics (World Bank and IMF 2018). This raises the risk that public sector debt is higher in some EMDEs than reported. This risk is compounded by indirect and hidden debt, especially debt incurred by state-owned enterprises and public-private partnerships (Melecky 2021).

In addition, a lack of clarity about commitments encumbers debt restructuring negotiations, scrutiny of borrowing decisions, and efforts to ensure that borrowed funds are well spent (World Bank, 2021i; Friedrich-Ebert-Stiftung and Consensus Building Institute 2021). Debt sustainability can be undermined by policies that impose strict nondisclosure clauses on government borrowers, require major liens and collateralization, and place guaranteed debt repayments in state-owned enterprises (G30 2021). For example, since 2015, Chinese lenders have made heavy use of confidentiality clauses in their debt contracts (Gelpern et al. 2021). From 2015 onwards, all of the more than 30 debt contracts by Chinese lenders to EMDE sovereigns that Gelpern et al. (2021) examined included unusually restrictive confidentiality clauses.

Some commodity traders or large financial firms lending to EMDE governments similarly fail to share contract information (G30 2021). Opaque lending is compounded by contractual obligations that preclude restructuring of some debts. For example, of 100 debt contracts by Chinese lenders to 24 EMDE sovereigns since the early 2000s examined by Gelpern et al. (2021), three-quarters included clauses that explicitly exclude the debt from Paris Club restructuring agreements.

Governance shortcomings. Many EMDEs, particularly LICs, still fall short in the strength of institutions that create distance between borrowing decisions and political pressures, as reflected in the low share of LICs that meet minimum requirements for debt administration, legal frameworks, and audit practices (World Bank 2019). This increases the risk that borrowing is excessive and not used for productive purposes. The perceptions of quality of public services are the worst in SSA, where most LICs reside. An index of government effectiveness suggests that the effectiveness of government services in SSA is almost twice as bad as that in MNA and SAR, on median (Kaufmann, Kraay, and Mastruzzi 2010). ECA and LAC are the best performers in terms of the perceptions of service quality, but they are still well behind advanced economies.

Global debt resolution practices. In several dimensions, the playing field is currently tilted in favor of creditors and discourages prompt and comprehensive debt resolution. For example, financial centers that adjudicate disputes related to debt restructuring—especially New York, where twothirds of outstanding sovereign bonds are governed—have provisions that favor hold-out bond holders. These include prejudgment penalties, large exemptions for buying bonds at steep discounts before default with the intent of suing subsequently, and modest taxes on excess capital gains (Stiglitz and Rashid 2020). While 91 percent of sovereign bond issuance since 2014 has 12