Developing countries' external debt hits record $9.4 trillion in 2025 — World Bank

Record debt growth as private capital returns

External debt of low- and middle-income countries rose by 5.5% in 2025 to a record $9.4 trillion — the fastest increase since 2021 and roughly four times the average annual growth of 0.5% recorded in 2022–2024. The figures are given in the International Debt Report 2026 published by the World Bank, as reported by Anadolu.

Private creditors returned, but at high prices

The main driver of growth was private financing: government bond issuance rose by 34.6% to $250.6 billion — the highest since 2021 — while total debt owed to private creditors increased by 5.2% to $5 trillion after growth of just 0.6% in 2024. Net debt inflows to developing countries more than doubled, reaching $423.5 billion, including $251.1 billion in long-term net inflows from private creditors. Currency effects accounted for 28.2% of the $301.8 billion increase in public and publicly guaranteed external debt, driven by the weakening dollar. Excluding China, which accounts for nearly a quarter of developing countries' debt and reduced external borrowing by 4.3% to $2.3 trillion, the debt of middle-income countries rose by 9.1% to $6.9 trillion.

The poorest countries pay the most

The report notes a widening divergence in financing terms. External debt of countries eligible for concessional financing through the International Development Association (IDA) grew by 8.1% to $1.3 trillion. These countries paid an average of 8.2% on new obligations to private creditors — the highest level since 1989 — and an average coupon of 9.4% on new bonds. The gap between private and official rates for them widened to 5.5 percentage points from 3.4 points a decade earlier. By comparison, middle-income countries borrowing through the International Bank for Reconstruction and Development paid an average of 5.5% on new bonds, down from 5.8% in 2024.

Debt service and a shift in flows

In 2025, developing countries paid a record $1.4 trillion in principal and interest — the fifth consecutive year of growth (+1.9%). Payments to bondholders rose by 13.7% to $363.1 billion, partly due to buybacks and early refinancing: 14 countries carried out buyback and exchange transactions on sovereign bonds worth $34.5 billion to cope with upcoming repayment 'peaks'. Over 2022–2025, developing economies transferred $436.1 billion more to debt service than they received in new external financing. At the same time, in 2025 the direction of flows changed: the net long-term transfer turned positive (+$45.4 billion) after three consecutive years of net outflow.

What it means

World Bank Chief Statistician Haishan Fu called the return of private lending to low- and middle-income countries desirable, but stressed: 'these countries are borrowing more, paying more and, in many cases, leaving less for long-term development.' According to the report, the high cost of borrowing threatens to crowd out critical investments in healthcare, education and infrastructure in the poorest countries. Thus, 2025 became the year when access to markets was restored, but its price remained historically high, and the burden was distributed unevenly: IDA's concessional borrowers are paying rates on private loans at 1989 levels, while middle-income countries saw a slight decline in the cost of new bonds.