Developing Countries’ External Debt Hits Record US$9.4 Trillion as Borrowing Costs Soar to 1989 Levels

Developing countries’ external debt rose 5.5% to a record US$9.4 trillion in 2025, the fastest pace since 2021, as expensive borrowing and rising repayments threaten development spending, according to the World Bank Group’s International Debt Report 2026.

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.

The divergence matters. IDA-eligible countries — the poorest — are paying nearly three percentage points more on bonds than their better-off peers, even as they carry the heaviest development burdens.

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.

That reversal is the one genuinely positive signal in the report: capital is returning. But the return is expensive, and the accumulated cost of the preceding years has not been undone.

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.

The statistical point carries a policy implication: some of the headline deterioration reflects measurement rather than new borrowing. But for governments budgeting in local currency, the dollar value of what they owe is what determines how much remains for schools, clinics and infrastructure.

Quick Facts

The World Bank’s International Debt Report 2026 puts developing countries’ external debt at a record US$9.4 trillion in 2025**, up **5.5%** — the fastest pace since 2021 and roughly **four times** the 2022–24 average. Public bond issuance rose nearly **35% to US$251 billion, the highest in five years, while debt in IDA-eligible countries climbed 8.1% to US$1.3 trillion.

The poorest borrowers paid an average of 8.2% on new private-creditor commitments — the highest since 1989 — and 9.4% on new bonds, while the private-official creditor rate gap widened from 3.4 percentage points in 2016 to 5.5 points in 2025. Total debt service reached US$1.4 trillion**, a fifth consecutive annual rise, with bondholder payments at **US$363 billion.

Between 2022 and 2025, developing countries paid US$436 billion more** in debt service than they received in new financing, though long-term flows turned from a **US$118 billion net outflow in 2024 to a US$45 billion net inflow in 2025**. More than a quarter of the **US$303 billion increase reflected a weaker US dollar rather than new borrowing.

Source: Accra Street Journal 

Last Updated on November 8, 2026 by Samuel Kwame Boadu

Samuel Kwame Boadu

Samuel Kwame Boadu is a Ghanaian media entrepreneur and storyteller with a passion for amplifying urban voices and uncovering everyday truths. He is the Editor-in-Chief and Founder of Accra Street Journal, a dynamic digital platform dedicated to capturing the pulse of Ghana’s capital—its people, culture, challenges, business, sports and innovations.

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