The expansion in external borrowing was propelled by a nearly 35 percent rise in private financing and public enterprise bonds, according to the World Bank's latest report. However, impoverished nations faced average interest rates of 8.2 percent on these new private loans, marking the steepest borrowing costs seen since 1989. To prevent immediate default, many authorities issued replacement debt at these punishing rates, ultimately locking in financial strain. Consequently, low- and middle-income nations spent a record $1.4 trillion on debt servicing in 2025, further draining local resources.
Key points
Debt-servicing outflows from developing countries outpaced new financing inflows by $436…: Debt-servicing outflows from developing countries outpaced new financing inflows by $436 billion between 2022 and 2025.
Governments are issuing expensive new debt to buy back maturing bonds, postponing relief…: Governments are issuing expensive new debt to buy back maturing bonds, postponing relief while locking in high rates.
Rising debt repayment demands risk crowding out essential human investments amid ongoing…: Rising debt repayment demands risk crowding out essential human investments amid ongoing pressures from inflation, wars, and tariffs.
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Washington: The external debt of developing countries in 2025 jumped at its fastest pace since the pandemic, the World Bank said on Thursday, hitting a record $9.4 trillion.
Most of the increase was driven by private financing, with borrowing from private creditors and bond issuance by public enterprises rising nearly 35 percent, the Bank's annual International Debt Report showed.
External debt grew the most among developing countries that the Bank classified as "the most vulnerable."
"Access to international finance has improved, but the price of finance has not, and high debt burdens in the poorest countries threaten to crowd out essential investments in people," the Bank said in a statement.
Haishan Fu, chief statistician at the World Bank Group, said the return of private lending to low- and middle-income countries was "welcome, but these countries are borrowing more, paying more, and in many cases leaving less for long-term development."
The report highlighted how many governments had issued new bonds to buy back maturing debt -- effectively kicking the debt can down the road, often at higher interest rates.
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