Developing countries’ external debt hits record $9.4trn — World Bank

The World Bank has disclosed that external debt of developing countries rose by 5.5 per cent to a record $9.4 trillion in 2025, marking the fastest increase since 2021.

The ‌⁠⁠‌‍⁠⁠‍‌⁠⁠World Bank disclosed this in its 2026 International Debt Report (IDR) released on Thursday, November 5, 2026, noting that the increase was about four times the average recorded between 2022 and 2024.

The bank said although access to international finance had improved, the price of finance had not improved.

It said mounting debt burdens were threatening to reduce investments in essential services and human development in the poorest countries.

The World Bank attributed much of the increase to private financing, with borrowing from private creditors rising significantly.

The World Bank also said bond issuance by public entities rose nearly 35 per cent to 251 billion dollars, the highest level in five years.

According to the bank, external debt grew fastest among the most vulnerable economies.

The World Bank revealed that external debt rose by 8.1 per cent to $1.3 trillion in countries eligible for concessional financing from the World Bank Group’s International Development Association (IDA).

It stated: “Early 2026 data indicated continued demand for international bond financing among low-and middle-income countries in spite of the high borrowing costs.

“By mid-August, more than 10 countries had exceeded their total bond issuance for the whole of 2025, while several others had returned to international financial markets.”

The bank further noted that IDA-eligible countries paid an average interest rate of 8.2 per cent on new commitments from private creditors in 2025, the highest since 1989.

It said interest rates on new bonds averaged 9.4 per cent.

The World Bank noted: “The gap between the interest rates paid by IDA-eligible countries to official and private creditors widened from 3.4 percentage points in 2016 to 5.5 percentage points in 2025.

“In comparison, countries eligible for only non-concessional loans from the International Bank for Reconstruction and Development (IBRD) paid an average of 5.5 per cent on new bonds, improving from 5.8 per cent in 2024.”

On debt servicing, the bank said low-and middle-income countries paid $1.4 trillion dollars in principal and interest in 2025, representing a 1.9 per cent increase and the fifth consecutive annual rise.

“Payments to bondholders also increased to 363 billion dollars, partly reflecting debt buybacks and advance repayments financed through new bond issuances,” the World Bank said.

The World Bank stated that developing countries paid $436 billion more in debt service than they received in new financing between 2022 and 2025.

It said the trend changed in 2025 as long-term debt flows shifted from a net outflow of 118 billion dollars in 2024 to a net inflow of 45 billion dollars.

The World Bank also identified currency movements as a contributing factor to the increase in reported debt.

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It said more than one-quarter of the $303 billion increase in public and publicly guaranteed debt resulted from the weakening of the United States dollar, which increased the dollar value of debt denominated in other currencies.

Commenting on the development, the World Bank Chief Statistician and Director of Development Data, Haishan Fu, said the return of private lending to low-and middle-income countries was welcome but came with significant financial costs.

Fu said: “The return of private lending to low-and middle-income countries is welcome, but these countries are borrowing more, paying more, and in many cases leaving less for long-term development.

“Managing debt responsibly means giving everyone, including future generations, a chance to thrive.”

The IDR is an annual World Bank publication providing external debt statistics and analysis for low-and middle-income countries reporting to the institution’s Debtor Reporting System (DRS).

Drawing on data collected through the DRS, the publication tracks borrowing patterns, emerging lending instruments, debt relief initiatives and best practices in debt recording and reporting.

The 2026 edition provides an analysis of external debt stocks and flows as of the end of 2025, examines debt dynamics, and their policy implications, and gives an update on the global debt transparency agenda.