World Bank says developing nations’ debt hit record $9.4T

In 2025, developing countries borrowed more and paid more for it. Their combined external debt rose 5.5% to a record $9.4 trillion, according to the World Bank's International Debt Report 2026, released Thursday, November 5. That was the fastest increase since 2021 and about four times the 2022–24 average. The Bank said international finance has become easier to get but has not become cheaper. It warned that heavy debt burdens in the poorest countries could crowd out spending on education, infrastructure, health and jobs.worldbank.org+1

Record borrowing costs for the poorest

Countries eligible for concessional financing from the International Development Association (IDA) paid an average of 8.2% on new commitments from private creditors in 2025. That is the highest rate since 1989. They paid 9.4% on new bonds, the Bank said. The gap between what these countries pay official lenders and what they pay private lenders grew from 3.4 percentage points in 2016 to 5.5 points. Countries that can borrow only on non-concessional terms paid an average of 5.5% on new bonds, down from 5.8% in 2024.worldbank.org

External debt grew fastest among the most vulnerable borrowers. IDA-eligible countries saw their debt rise 8.1% to $1.3 trillion, Reuters reported. "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.reuters.com

Markets reopen, at a price

Private financing drove much of the increase. Bond issuance by public entities rose nearly 35% to $251 billion, the highest in five years, as markets reopened to many developing economies, according to the Bank. Many governments sold new bonds to buy back debt that was coming due. This spread out their repayments but did little to cut total debt, and the new bonds often carried higher interest rates. Demand kept up in 2026. By mid-August, more than 10 countries had already issued more bonds than in all of 2025.worldbank.org

Low- and middle-income countries paid $1.4 trillion in principal and interest in 2025, the fifth annual increase in a row. Payments to private creditors rose 13.7% to $363 billion, Reuters reported. From 2022 through 2025, these countries paid $436 billion more in debt service than they received in new financing. That trend reversed in 2025, when long-term debt flows produced a net inflow of $45 billion after a $118 billion net outflow the year before.reuters.com

Dollar effect and transparency concerns

The weaker US dollar inflated the figures. It accounted for more than a quarter of the $303 billion rise in public and publicly guaranteed debt, because it raised the dollar value of debt owed in other currencies, the Bank said. For several large concessional borrowers, this currency effect was bigger than the principal they repaid.worldbank.org

The report also called for more transparency about debt arrangements. It warned that new creditors, new instruments and guarantees can make a country's full debt exposure hard to see. It said continued bond borrowing raises "critical questions" about whether the terms are sustainable and whether the capital raised is reaching the people and places that need it most.reuters.com