Developing countries’ external debt surges to a record $9.4trn – World Bank
Access to international finance has improved, but the price of finance has not, and high debt burdens in the poorest countries threaten to crowd out essential investments in people.
In 2025, the external debt of developing countries surged to a record $9.4 trillion, marking the fastest growth since 2021 and nearly quadrupling the average from 2022-24, according to the World Bank Group's International Debt Report 2026. Private financing was a significant contributor to the rise, with borrowing from private creditors increasing sharply and bond issuance from public entities rising 35% to $251 billion, the highest level in five years as markets reopened to many developing economies.
The most vulnerable nations saw the steepest increase, with external debt climbing 8.1% to $1.3 trillion. World Bank Group Chief Statistician Haishan Fu expressed concern that increased borrowing and higher interest rates leave less for vital development, stating that responsible debt management is crucial for future generations.
Many governments issued new bonds to refinance maturing debt, extending repayment timelines without reducing overall debt stocks, often at higher interest rates. Despite high borrowing costs, demand for international bond financing persisted in 2025, with over 10 countries surpassing their 2025 issuance targets. The disparity between rates paid by IDA-eligible countries and those eligible only for non-concessional loans widened, with the former paying 8.2% in 2025, the highest since 1989, compared to 5.5% for the latter.
The growing debt burden and higher global interest rates placed significant strain on debt-service payments, with developing nations paying $1.4 trillion in principal and interest in 2025, a 1.9% increase and the fifth consecutive annual rise. Payments to bondholders climbed to $363 billion, partly due to debt buybacks and prepayments financed through new bond issuances.
The debt-service situation improved in 2025 as long-term debt flows shifted from a $118 billion net outflow in 2024 to a net inflow of $45 billion, partly due to currency fluctuations, with the weaker US dollar raising the dollar value of debt denominated in other currencies, particularly for several of the largest concessional borrowers.
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