Hidden Debt Revelations

How reliable are public debt statistics? This paper quantifies the magnitude, characteristics, and timing of hidden debt by tracking ex post revisions to sovereign debt statistics. We assemble a comprehensive new database of 119 editions, or vintages, of League of Nations, United Nations, IMF, and World Bank debt statistics, covering up to 187 countries over more than a century. We show that public debt is systematically underreported, with upward revisions averaging roughly one percent of GDP across advanced and developing economies, external and domestic debt, and all reporting systems we examine. Hidden debt accumulates in good times and tends to be revealed in bad times, often during IMF programs and sovereign defaults. Over the past one hundred years, nearly half of all sovereign defaults have coincided with substantial upward revisions to reported public debt. We incorporate these patterns into a quantitative sovereign default model and show that hidden debt raises default risk and borrowing costs, and thereby contributes to debt intolerance. Differences in the reliability of debt data across countries account for roughly 20% of the observed gap in debt-carrying capacity between low and high-income economies.