By Toby McIntosh
The International Monetary Fund will use “sharpened claws” to get governments to disclose more about their national external debts, a top IMF official said recently.
Senegal is a likely scratching post for these claws, after the new government disclosed this year that its external “sovereign” debt was massively understated.
As a consequence, the IMF froze financial support for Senegal and is demanding “corrective measures” and “urgent reforms.” What the IMF wants specifically remains unclear.
However, the IMF’s handling of the situation in Senegal, possibly in the coming weeks, may set a standard for what it tells other countries to do on debt transparency.
Readers: Get reliably notified of new EYE postings. Please sign up for free using Subscribe in the right column. No deluge, usually several articles a month on a variety of global transparency topics. Or, less reliably, follow EYE on Bluesky @tobymc.bsky.social, Twitter @tobyjmcintosh or LinkedIn.
Range of Available Debt Transparency Solutions
The “sharpened claws” remark was delivered by Mark Flanagan, Deputy Director of the IMF’s Strategy, Policy, and Review Department, a division which has “enormous behind-the-scenes power,” as a former employee wrote.
His comments came at the start of a two-day session on debt transparency, May 14-15, at the IMF headquarters in Washington. The first half day of the meetings were open, with panels including IMF and World Bank officials, academics and representatives from the public and. private sectors. (The recording is here – IMF Videos – Annual Legal Conference 2025: Legal Foundations of Public Debt Transparency.) The next day and a half of the event was closed to the public, but attended by representatives from 72 countries.
Flanagan described a variety of impediments to more transparency about debt. He spoke about inadequate governance arrangements, limited audit controls, weak legislative oversight, under-resourced budget departments and overuse of broad confidential clauses in contracts.
IMF shareholders, he said, have been asking for more action on debt transparency since 2018, and the IMF “has been including strong incentives into our frameworks agreements, and we will continue to do that,” Flanagan said.
A working paper from early 2024 by the IMF legal department, which sponsored the conference, provides data suggesting that the IMF still has much to do. Based on a review of the laws in 85 countries, the legal department identified “critical weaknesses that hinder debt transparency.”
Flanagan offered a caveat, noting that setting conditions on countries is subject to the IMF’s policy on conditionality, “that it has to be macro-critical.”
He did not elaborate, but a described in a 2021 IMF background paper macro-criticality appears to include governance issues, without getting too deep into specifics. It states, “In the context of declining trust, governance and institutional issues will be more critical in ensuring sound economic policies and economic sustainability.”
Flanagan’s claws comment was metaphorically challenged at the IMF forum by the panel moderator, Anna Gelpern, a professor of Professor of Law and International Finance at Georgetown University who is leading a new effort to gather debt data.
The IMF’s approach is more like “a warm hug,” Gelpern said, “A firm hug for good data.”
IMF Managing Director Makes Pledges
If there are to be sharpened claws, they were covered in velvet mittens by Kristalina Georgieva, the IMF Managing Director, who kicked off the IMF meeting.
However, she was adamant about debt transparency as a goal. She summarized the dangers of increasingly high public debt and called for more transparency. (Full text of her remarks.)
“Simply put, you cannot manage what you cannot see,” she said. “And this is why we need light to cut through the fog surrounding the mountain of debt.” She spoke of needing “the right laws and requirements.”
Georgieva cited a June 2023 IMF paper, Making Public Debt Public, that outlines a range of options to improve public debt transparency. The report said the IMF “could contribute to these reforms with actions within its mandate but would need significant additional resources.”
The Managing Director said that “gaps in borrowing countries’ domestic, legal, institutional, and operational frameworks hinder transparency.” She emphasized, “We ought to close those gaps.”
Summarized current IMF work on debt transparency, Georgieva said that the IMF is requiring more information about public debt and has “scaled up our training on debt transparency” for government officials.
The IMF’s debt limit policies, she said, “[n]ow require more detailed transparency on debt information,” including “publication of the holders of a country’s public debt.” In the context of the IMF’s periodic Article IV consultations with countries, she said, “[w]e introduced a more structured and transparent assessment of data adequacy on debt, where broader and more granular debt data will be required.”
The IMF has “scaled up our training on debt transparency” for government officials, she said, adding, “We have delivered over 200 capacity development projects just on debt management in the last two years.”
Supporting a need for legal reforms, she said countries “need to answer”who has the authority to borrow on behalf of the country, who can sign a valid contract, and whether can the state’s resources be used as collateral.
Georgieva recapped the legal department’s working paper, saying that “less than half of the country surveyed require debt management and fiscal reporting.”
“It’s a big gap we have to close,” she said. The legal definition of public debt “is too narrow” when it excludes state-owned enterprises or excludes certain types of borrowing, according to the Managing Director.
Looking ahead, she said an upcoming review of debt sustainability analysis for low-income countries “will consider how we can better support debt transparency.”
Georgieva pledged that the IMF will “concretely commit specifically to how we are going to act to advance this agenda.” This will include “systematically” reporting on its work in this area, including “on progress in strengthening legal frameworks for debt transparencies.”
Legal Department Sees ‘Critical Weaknesses’
The extent of the debt transparency problem is documented in the working paper from the IMF legal department that identified “critical weaknesses that hinder debt transparency.”
The IMF legal department also described many possible preventatives. Among other suggestions are creation of stronger state audit institutions and adoption of better laws including on access to information. (Senegal does not have an access to information law.)
The legal department said many countries have low reporting obligations, limited coverage of public debt, inadequate monitoring, unclear borrowing and delegation processes, unfettered confidentiality arrangements and weak accountability mechanisms.
Among the findings, “Less than 50 percent of countries surveyed require debt management and fiscal reports.” And further, “[b]orrowing authorization provisions are often vague and lack a clear process for delegating that authority.”
“A robust legal framework is key to improving disclosure on SOE debt by governments and SOEs,” according to the report, referring to state-owned enterprises, SOEs.
Georgieva Notes Debt Roundtable Suggestion
Georgieva said the IMF’s work on the Global Sovereign Debt Roundtable (GSDR) and the Common Framework (the mechanism for debt restructuring) will engage constructively all relevant parties “so they do their part for debt transparency.” Both debtors and creditors should be more transparent, she said.
But she did not address a recent proposal for creation of a database that was made by the GSDR, which brings together debtor countries and creditors for biannual meetings.
Transparency is mentioned frequently in the minutes of an April 23 meeting. “GSDR participants generally agreed that debt transparency is primarily the responsibility of borrowing countries’ authorities, but creditors also have a role to play, including by reconciling their claims with the borrower’s,” according to the minutes.
The GSDR proposal envisions a data platform to be used during restructurings. The minutes state, “Given the urgency of debt transparency and accurate debt information, consideration should be given to the development of a digital platform to facilitate the automatic reconciliation of debt transactions between borrowers and official creditors, and generate real-time data.”
The GSDR participants also listed a variety of possible national-level reforms and suggested the inclusion of “transparency clauses” in restructuring agreements.
Other Debt Transparency Initiatives
An initiative to gather more national information on debt, led by Gelpern and others, aims to collect data on debt and the relevant loan documents in five countries.
The Sovereign Debt Forum and Massive Data Institute at Georgetown’s McCourt School of Public Policy early in 2025 launched the #PublicDebtIsPublic initiative with the goal of creating “the first centrally-collated web-based sovereign debt documentation and data commons.” It is supported the Gates Foundation,
During a nine-month pilot phase, the goal is to collect public documents in five countries: Indonesia, Jamaica, Kenya, the Netherlands, and Peru. A prototype launch in October is planned.
Separately, the Emerging Markets Investors Alliance (EMIA) recently announced a set of “Model Clauses for Transparency Covenants“ that “can be readily included in debt issued as part of EM sovereign debt restructurings.”
Reforms in Senegal?
Senegal may soon feel the sharpened claws, but the IMF has not been publicly specific about conditions might be imposed.
Future funding will be “contingent on obtaining the final debt data and reaching an agreement on corrective measures,” an IMF spokesperson told Reuters. “Only after these steps will discussions on a new programme commence,” the spokesperson said. Previously the IMF called for “urgent reforms” from Senegal. (See April 2, 2025, Eye on Global Transparency article.)
At the moment, the IMF is awaiting the transmittal of the final audit report, which had been promised by the end of April. The preliminary audit report showed that sovereign debt for 2023 wasn’t 74.4 percent of gross domestic product (GDP), as stated by the previous government, but rather 99.7 percent of GDP.
The larger external debt figure was largely caused by “previously undisclosed liabilities, including hidden loans,” as the IMF put it, and was laid to the administration of former president, Macky Sall, who was elected in 2012 and defeated in 2024. But few details have been released. Whether the final report will include forensic detail that might inform future policy prescriptions remains to be seen.
Once the final audit report is received, discussions on corrective measures are expected to commence between Senegal and the IMF.
The outcome would need to be approved by the IMF board. Country officials have expressed a hope for a new financial program in June or July, but the slipping schedule could put that in doubt. The board does not meet in August.
Looking Backward on IMF Engagement With Senegal
A series of IMF press releases and reports provide some information on governance-related efforts being pursued in Senegal following the IMF’s June 2023 approval of $1.8 billion in loans to help Senegal.
However, whether progress was being made was strongly questioned by Birahime Seck, the General Coordinator of the Forum Civil, an NGO that is the Senegalese section of Transparency International.
“To date, Senegal has been slow in implementing serious, structural reforms to combat money laundering, promote transparency in the management of public affairs, and prevent and combat corruption,” wrote Seck in October of 2023. continuing, “On the contrary, we are witnessing the persistence of poor governance and a chronic lack of accountability on the part of control and/or regulatory bodies.”
Seck detailed many reforms that he said the government was failing to implement. He called on the IMF to take a more active oversight role.
If the IMF was dissatisfied with the Senegal’s progress on governance reforms, it is not apparent from IMF documents over the past three years.
After a September 2024 IMF mission to the Senegal, a press release said: “The authorities reaffirmed their commitment to the reforms underpinning the IMF-supported program. They also renewed their commitment to transparency, good governance, and public accountability.”
There was a mention of the audit that confirmed rumors of the significant under-reporting of external debt. The IMF at the time said, “The authorities informed the IMF team that the general audit of public finances is nearing completion, and that its findings and recommendations are expected to facilitate the implementation of robust measures to set public finances on a new path towards deficit and debt reduction.”
In previous communications, the IMF took an optimistic tone about governance reforms.
A press release that summarized a June 2024 IMF visit to Senegal says in part, “The IMF team welcomes the progress on structural reforms.”
The IMF summarized:
Key measures include commitments to (i) strengthening the Office for National Anti-Corruption (OFNAC); (ii) adopting a law protecting whistleblowers; and (iii) completing the remaining two measures necessary to exit the Financial Action Task Force (FATF) grey list. Additionally, the authorities are committed to (iv) enhancing governance in the extractive sector by disseminating information on the ultimate beneficiaries of companies engaged in this sector, in line with Senegal’s adherence to the Extractive Industries Transparency Initiative (EITI) standards.
In June of 2023, the IMF Executive Board approved an Extended Credit Facility (ECF) and an Extended Fund Facility (EFF) in the amount of US$1.51 billion with Senegal, in addition to a Resilience and Sustainability Facility (RSF) in the amount of US$324 million. An IMF official’s statement summarizes the arrangement, without much detail.
The official said:
Resolute implementation of structural reforms, including by enhancing social safety nets, strengthening governance and transparency, improving the business environment, and addressing weaknesses in the financial sector will promote a more inclusive and private sector-led growth. Empowering the anti-corruption agency (OFNAC) and strengthening the asset declaration system for public officials will be critical to strengthen the anti-corruption frameworks. Urgent actions are also needed to address deficiencies in the AML/CFT framework to avoid possible negative macroeconomic and reputational repercussions and to exit from the FATF’s grey list.
An IMF staff review report in December of 2023 was upbeat, saying: “The authorities are implementing the structural reforms agreed under the program, including steps to strengthen revenue administration and public financial management, enhance governance and improve the anti-corruption frameworks. Reforms agreed under the RSF are being implemented steadily.”
The last Article IV report on Senegal was published in 2022, with some comments on transparency issues. The report summarized, “The authorities underscored their commitment to revenue mobilization and transparent budget practices, including for oil and gas revenues.”
Mozambique Example Summarized
In 2016, major undisclosed debts were discovered in Mozambique, causing a financial crisis.
The subsequent policy fixes were described in a 2022 blog post by two World Bank staffers. “The “hidden debts” episode exposed the country’s governance weaknesses at the time,” they wrote.
On the actions taken, they elaborated:
In 2017, Mozambique concluded an independent audit of the “hidden” loans, documenting the lack of due process under Mozambican law. Subsequently, Mozambique’s Attorney-General started proceedings against several Mozambican officials allegedly involved in contracting the loans, and the British financial supervisor pressed charges against the lending financial institutions. Several trials are underway in different jurisdictions. When the loans were contracted, the regulatory framework for state guarantees only required that guarantees remain within the yearly limit; the law was silent on who should approve publicly guaranteed debt.
The Bank, the authors said, “pivoted its portfolio towards technical assistance to help address the governance weaknesses that led to the crisis.”
Changs included “tightening checks and balances on guarantees and resuming transparent debt reports,” introducing fiscal risks statements including for state-owned enterprises and establishing a public investment management system and regulatory framework.
“These reforms led to the adoption of a revised overarching public financial management (PFM) Law in 2020, integrating the SOE sector and decentralized bodies into the budget system for the first time,” according to the article. The authors outlined other steps that still needed to be taken, but concluded “The crisis that ensued from the “hidden debt” scandal provided an excellent opportunity to undertake reforms.”
The IMF, following the 2016 debt crisis there, worked with Mozambique on a “governance diagnostic,” published in 2019.
Part of the diagnostic report summarized previous actions. The 2019 diagnostic also said “weaknesses remain in several relevant areas of the economy. ” In that list was that “debt management is weak and lacks transparency, and treasury management is marked by inefficiencies and weak controls.” The 57-page report contains many specifics on a reform agenda.
