Developing Countries Face Record $9.4 Trillion in External Debt, Says World Bank

According to the World Bank, developing countries’ external debt has reached a staggering $9.4 trillion in 2025. This increase is largely due to governments borrowing more from private lenders and international bond markets, especially as interest rates rise.

The World Bank shared these findings in its International Debt Report 2026, released recently. The report highlights that the rapid growth in debt is putting significant pressure on public finances, particularly in poorer countries. The increase in external debt is the fastest since 2021 and is about four times the average growth seen from 2022 to 2024.

Countries eligible for special financing from the World Bank saw their external debt grow by 8.1% to $1.3 trillion. The report noted that private creditors played a major role in this increase, as developing economies began to access international financial markets again. Public entities issued nearly $251 billion in bonds, marking a 35% rise—the highest in five years.

Haishan Fu, the World Bank Group’s Chief Statistician, commented that while the return of private lending is positive, it comes with significant financial challenges. He emphasized the need for responsible debt management to ensure future generations can benefit from development opportunities.

Many governments are issuing new bonds to manage their existing debts, but this strategy often leads to higher interest rates and does not effectively reduce overall debt levels. For instance, countries eligible for concessional financing paid an average interest rate of 8.2% on new loans in 2025, the highest rate since 1989.

In total, low- and middle-income countries paid $1.4 trillion in principal and interest in 2025, marking a 1.9% increase. Payments to bondholders reached $363 billion, partly due to debt buybacks and early repayments. The report also pointed out that between 2022 and 2025, these countries paid $436 billion more in debt service than they received in new financing.

Despite these challenges, early data for 2026 shows that demand for international bond financing remains strong. By mid-August, over ten developing countries had already surpassed their total bond issuance for 2025, indicating continued access to international markets.