Debt of poorest countries hits record $9.4tn, World Bank reveals

The debt of developing countries rose to a record $9.4 trillion (€8.36 trillion) last year, the World Bank said.

The interest being paid on this debt also rose to the highest rate since the 1980s, it said.

In its annual international debt report, the World Bank said the jump in external debt in 2025 represented the largest annual increase since 2021 just after the pandemic.

This threatened to ​crowd out essential investments in education, infrastructure, health and jobs, the Washington-based institution said.

Many governments in 2026 issued new bonds to buy back maturing debt and smoothen their repayment profiles.

“However, this was done without significantly reducing debt stocks, often at higher interest rates,” it said.

“Early 2026 data show continued demand for international bond financing from low- and middle-income countries despite the high costs.”

By mid-August, more than 10 countries had exceeded their full-year 2025 issuance, while several others returned to international markets.

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The report noted how private financing drove much of the annual increase in debt.

Borrowing from private creditors jumped and bond issuance from public entities rose nearly 35 per cent to $251 billion, the highest level in five years as markets reopened to many developing countries.

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External debt grew fastest among the most vulnerable countries, the bank said, increasing 8.1 per cent 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 of 8.2 per cent on new private-creditor debt in 2025 – the highest rate since 1989 – and 9.4 per cent 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,” it said.

In comparison, countries eligible for only non-concessional loans from the World Bank Group’s International Bank for Reconstruction and Development (IBRD) paid an average of 5.5 per cent on new bonds, an improvement from the 5.8 per cent rate the previous year.

“A troubling paradox is taking shape across the global financing landscape. Access to international finance has improved, but the price of that finance has not,” the bank said.

“Low and middle-income countries are borrowing more, paying more, and, in many cases, leaving less for long-term development.”

While debt pressure has triggered a bond-market rout in Europe, centred on France, debt-service pressures in the developing world remained most severe as a result of the higher interest rates.

Low- and middle-income countries paid $1.4 trillion in principal and interest in 2025, up 1.9 per cent and marking a fifth consecutive annual increase. Payments to bondholders climbed to $363 billion, partly reflecting debt buy-backs and prepayments financed through new bond issues.

Between 2022 and 2025, developing countries paid $436 billion more in debt service than they received in new financing.

“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.”