When taking on new debt, governments may borrow from commercial banks, access the sovereign bond market, borrow from official bilateral creditors, or from multilateral financial institutions. While some of the structure of government borrowing reflects macroeconomic conditions and country creditworthiness, governments' choices among borrowing instruments also are driven by their preferences over transparency. Those governments that are ---typically for domestic political reasons--- inclined not to make available information about the state of their economy and the state of their financial institutions will prefer, all else equal, to borrow from commercial banks (versus to issue bonds), or to borrow from official bilateral creditors (rather than multilateral ones). Borrowing from these entities imposes fewer disclosure requirements, and disclosures are made to a narrower audience. We test our hypotheses using data on the composition of government debt over time, for a large set of developing countries. We find evidence that transparency correlates with the choice of disintermediated, rather than intermediated, credit.
