Developing countries’ external debt hits record US$ 9.4 trillion
Private creditors returned in force and bond markets reopened, but poorest countries’ borrowing faced highest costs in decades
KAMPALA, November 6, 2026 – External debt in developing countries rose by 5.5 percent to a record US$ 9.4 trillion in 2025, marking the fastest annual increase since 2021, as rising borrowing costs and mounting debt-servicing obligations continued to put pressure on national economies.
According to the World Bank Group’s International Debt Report 2026, the increase was nearly four times the average recorded between 2022 and 2024, despite improved access to international financing.
The report warns that although developing countries are finding it easier to access international capital, the cost of borrowing remains high, with mounting debt burdens threatening to divert resources from essential investments in people and long-term development.
Private creditors accounted for much of the increase, with borrowing from private sources rising significantly. Bond issuance by public entities also increased by nearly 35 percent to US$ 251 billion, the highest level in five years, as international financial markets reopened to many developing countries.
The increase was particularly pronounced among the most vulnerable economies. External debt in countries eligible for concessional financing from the World Bank Group’s International Development Association [IDA] rose by 8.1 percent to US$ 1.3trn.
“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,” said Haishan Fu, World Bank Group Chief Statistician and Director of Development Data.
“Managing debt responsibly means giving everyone – including future generations – a chance to thrive,” she added.
The report notes that many governments issued new bonds to repay maturing debt, helping to spread out repayment obligations without significantly reducing their overall debt stocks. However, such refinancing often came at higher interest rates.
Early 2026 data indicate that demand for international bond financing among low- and middle-income countries has remained strong despite the high borrowing costs. By mid-August, more than 10 countries had already surpassed their total bond issuance for 2025, while several others had returned to international capital markets.
For IDA-eligible countries, the cost of borrowing from private creditors remained particularly high. They paid an average interest rate of 8.2 percent on new private-creditor commitments in 2025, the highest since 1989, while new bond issues attracted an average rate of 9.4 percent.
The gap between interest rates paid by IDA-eligible countries to official and private creditors also widened, rising from 3.4 percentage points in 2016 to 5.5 percentage points in 2025.
By comparison, countries eligible for non-concessional financing only from the World Bank Group’s International Bank for Reconstruction and Development [IBRD] paid an average of 5.5 percent on new bonds, down from 5.8 percent in 2024.
Debt-servicing obligations remained substantial amid elevated global interest rates. Low- and middle-income countries paid US$ 1.4trn in principal and interest in 2025, representing a 1.9 percent increase and the fifth consecutive annual rise.
Payments to bondholders climbed to US$ 363bln, partly reflecting debt buybacks and early repayments financed through new bond issues.
Between 2022 and 2025, developing countries paid US$ 436bln more in debt servicing than they received in new financing.
However, the trend shifted in 2025, when long-term debt flows moved from a net outflow of US$ 118bln in 2024 to a net inflow of US$ 45bln.
Currency movements also contributed to the increase in reported debt levels. More than a quarter of the US$ 303bln rise in public and publicly guaranteed debt was attributed to the weakening of the US dollar, which increased the dollar value of debt denominated in other currencies.
For several of the largest concessional borrowers, the impact of currency movements outweighed the principal repayments made during 2025, resulting in higher reported debt levels despite continued debt servicing.
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