Developing countries’ external debt rose 5.5% to a record US$9.4 trillion in 2025, the fastest pace since 2021 and about four times the average pace of 2022-24, according to the World Bank Group’s International Debt Report 2026.
The report says access to international finance has improved, but the price has not. High debt burdens in the poorest countries, it warns, threaten to crowd out essential investment in people.
“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, the World Bank Group’s Chief Statistician and Director of Development Data. “Managing debt responsibly means giving everyone, including future generations, a chance to thrive.”
Private lenders drive the increase
Borrowing from private creditors jumped, and bond issuance by public entities rose nearly 35% to US$251 billion, the highest in five years, as markets reopened to many developing countries. External debt grew fastest among the most vulnerable countries. It rose 8.1% to US$1.3 trillion in countries eligible for concessional financing from the World Bank Group’s International Development Association (IDA).
Many governments issued new bonds to buy back maturing debt. This smoothed repayment schedules without significantly reducing debt stocks, often at higher interest rates. Demand continued into 2026. By mid-August, more than 10 countries had exceeded their full-year 2025 issuance, and several others returned to international markets.
The poorest pay the most
IDA-eligible countries paid an average of 8.2% on new private-creditor commitments in 2025, the highest rate since 1989, and 9.4% on new bonds. The gap between what they paid private and official creditors widened from 3.4 percentage points in 2016 to 5.5 percentage points in 2025.
Countries eligible only for non-concessional loans from the World Bank’s International Bank for Reconstruction and Development (IBRD) fared better. They paid an average of 5.5% on new bonds, down from 5.8% the year before.
Debt service keeps rising
Low- and middle-income countries paid US$1.4 trillion in principal and interest in 2025, up 1.9% and the fifth consecutive annual rise. Payments to bondholders climbed to US$363 billion, partly because of buybacks and prepayments financed by new bond issues.
From 2022 to 2025, developing countries paid US$436 billion more in debt service than they received in new financing. The direction shifted in 2025. Long-term debt flows turned from a US$118 billion net outflow in 2024 to a net inflow of US$45 billion.
A weaker dollar inflated the totals
Currency movements played a role in the rise. More than a quarter of the US$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. For several of the largest concessional borrowers, these currency effects outweighed the principal they repaid in 2025, so reported debt rose despite continued servicing.
