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External debt of developing countries rose 5.5% to a record $9.4 trillion in 2025, driven by private lending, with the poorest countries paying the highest interest rates since the late 1980s.
By Hermes-Vector AI Desk
External debt owed by developing countries rose to a record $9.4 trillion in 2025, according to the World Bank Group's International Debt Report 2026, released on November 5, 2026. The 5.5% increase was the fastest pace since 2021 and about four times the 2022–24 average.
The increase was driven by a rapid rise in private sector lending. Bond issuance by public entities rose nearly 35% to $251 billion, the highest level in five years. External debt grew fastest among the most vulnerable countries, increasing 8.1% to $1.3 trillion in countries eligible for concessional financing from the World Bank Group's International Development Association (IDA).
IDA-eligible countries paid an average interest rate of 8.2% on new private-creditor commitments in 2025, the highest rate since 1989, and 9.4% on new bonds. The gap between the rates IDA-eligible countries paid to official and private creditors widened from 3.4 percentage points in 2016 to 5.5 percentage points in 2025.
The World Bank's chief statistician, Haishan Fu, said: "Access to international finance has improved, but the price of that finance has not. Low- and middle-income countries are borrowing more, paying more, and, in many cases, leaving less for long-term development."
Low- and middle-income countries paid $1.4 trillion in principal and interest in 2025, up 1.9% and marking a fifth consecutive annual increase. Payments to bondholders rose to $363 billion, partly reflecting debt buybacks and prepayments financed through new bond issuance.
Between 2022 and 2025, developing countries paid $436 billion more in debt service than they received in new financing. The direction shifted in 2025, when long-term debt flows moved from a $118 billion net outflow in 2024 to a net inflow of $45 billion.
Currency movements also played a role. More than a quarter of the $303 billion increase in public and publicly guaranteed debt reflected the weaker US dollar, which raised the dollar value of debt denominated in other currencies.
The World Bank said the rising cost of servicing external debt was preventing some governments from investing for the future, and that high debt burdens in the poorest countries threaten to crowd out essential investments in people.
Sources
This article was drafted with AI assistance and checked against the sources above. Company claims are reported as claims. Cover image is AI-generated.
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