G20 falls short on loan transparency

Despite making debt transparency one of the key items for discussion this year, the 20 have failed to take decisive action to improve debt and loan transparency.

In the final statement of the G20 Finance Ministers (8-9 June), which was replicated by the G20 leaders (28-29 June), the G20 did state that “the importance of joint efforts undertaken by both borrowers and creditors, official and private, to improve debt transparency and secure debt sustainability”. The clear recognition of the responsibility of lenders, both official and private, is welcome.

On the side of private lenders, the G20 said “We support the work of the Institute of International Finance on the Voluntary Principles for Debt Transparency to improve debt transparency and sustainability of private financing and look forward to follow up”.

The Institute of International Finance (IIF) is adopting principles for its member banks to disclose details of loans to 68 low and middle-income countries on a public registry. This again is a welcome step forward. However, the principles have not begun to be implemented yet as no public institution – such as the IMF or World Bank – has agreed to host the registry. The IMF, World Bank, Bank for International Settlements and IIF have now setup a working group on operationalising the principles.

Heads of government at the G20 summit in June 2019 (Government of South Africa, Flickr)

On public lenders, in 2017 the G20 agreed Operational Guidelines for Sustainable Financing. These are very limited as they only commit G20 countries to sharing information on loans they give with staff of the IMF and World Bank. This means civil society, media and national parliaments can be left in the dark. And even if the loan information is then included in an IMF and World Bank Debt Sustainability Assessment, this could take two to eight years between a loan being given to the public knowing about it. Even this is not certain as borrowing governments can keep Debt Sustainability Assessments secret.

Over the last year, G20 governments have been conducting self-assessments of how well they are implementing the Operational Guidelines. We understand that five of the 20 governments have failed to do this, though five non-G20 European government have done so. In their 2019 statement the G20 say: “We welcome the completion of the voluntary self-assessment of the implementation of the G20 Operational Guidelines for Sustainable Financing and the IMF-WBG note on the survey results and policy recommendation. We applaud the G20 and non-G20 members who completed the survey. We will continue to discuss the issues highlighted by this note, aiming to improve financing practices.”

However, making a mockery of claims that the G20 is prioritising transparency, the self-assessments of how transparent G20 governments are being in their lending have not been publicly disclosed.

If private banks do implement the principles they have now agreed, they will be being more transparent than government lenders. Many G20 governments, including Western governments as well as China, do not systematically release information on their loans to other governments. The UK government’s main lender, UK Export Finance, releases basic information on loans in its annual report, but this means it can be up-to 18 months after the loan was given. And they do not release key information banks have committed to disclose, such as a guide to the interest rate on their loans.

The attention transparency has received, and the recognition of the responsibility of lenders is welcome. But there is still a lack of action to match the rhetoric. The key steps willing G20 governments could take are:
• Create a public registry of loans to governments
• Commit to disclosing all their loans on it, as well as multilateral institutions which they control
• Legislate to require lenders using their jurisdictions (especially UK and New York law) to have to publicly disclose loans on the registry for them to be legally enforceable

Ahead of the G20, 51 UK MPs from every party in parliament wrote in to the Chancellor in support of these measures, including former International Development Secretaries Justine Greening, Andrew Mitchell and Hilary Benn, and Chair of the International Development Select Committee Stephen Twigg.

In June the UK’s Labour party announced if it were in government it would “pass an Overseas Loan Transparency Act. That Act will set up a public register. Any loans made to foreign governments, including state-owned enterprises, that are not disclosed on that register within 30 days would be unenforceable in British courts. We will consult on how to catch loans made indirectly through intermediaries to stamp out the scourge of secret loans.”

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