World Bank reports developing nations' external debt reaches record $9.4 trillion in 2025

Developing countries’ external debt climbed to a record $9.4 trillion in 2025, according to the World Bank’s International Debt Report 2026 released on 5 November 2026. The increase of 5.Growth accelerated to 5%, marking the swiftest pace observed since 2021 and approximately quadrupling the mean expansion seen from 2022 through 2024. This acceleration stemmed from increased borrowing from private lenders and restored entry into global bond markets, causing public sector bond issuance to jump nearly 35% to $251 billion, a five-year peak.

The report highlighted that the rise placed considerable strain on public finances, especially in the poorest nations. Nations qualifying for concessional loans from the World Bank’s International Development Association (IDA) experienced an 8% rise in external debt.1% to $1.3 trillion. The World Bank’s chief statistician, Haishan Fu, noted that while the return of private lending is welcome, it comes with higher borrowing costs and reduced resources for long‑term development.

Background

The International Debt Report 2026 builds on earlier annual assessments that track external liabilities of low‑ and middle‑income economies. The 2025 figures represent the steepest year‑on‑year rise since 2021, a period when global financial markets began reopening to emerging economies after pandemic‑related tightening. Private lenders made up a substantial portion of this growth, indicating a recovery of trust in these financial sectors. In addition to bond issuance, public entities accessed private‑creditor financing, contributing to the overall debt expansion.

For IDA‑eligible countries, the average interest rate on new private‑creditor commitments reached 8.2% in 2025 – the highest level since 1989. New bonds issued by these economies carried an average rate of 9.4%. By contrast, countries borrowing on non‑concessional terms paid an average of 5.5% on new bonds, down slightly from 5.8% previously. The interest rate disparity between private and official lenders for IDA-qualifying countries expanded from 3.4 percentage points in 2016 to 5.5 points in 2025.

Nigeria, a notable IDA borrower, owed the agency about $19.12 billion as of 30 June 2026, according to the Debt Management Office. In total, low- and middle-income economies disbursed $1.4 trillion in principal and interest payments during 2025, representing a 1.9% increase and the fifth consecutive year of rising debt‑service costs.

Why it matters

The record level of external debt and the accompanying rise in interest rates have direct implications for fiscal space in developing economies. Higher debt‑service obligations reduce the amount of resources available for essential development investments such as health, education and infrastructure. The World Bank warned that mounting costs could leave governments with fewer options to fund these priorities.

The steep interest rates, especially for IDA‑eligible countries, exacerbate the challenge. An average 8.2% rate on private‑creditor commitments and 9.4% on new bonds represent the highest borrowing costs in decades, increasing the burden on already vulnerable budgets. The widening spread between private and official creditor rates indicates that concessional financing is becoming relatively cheaper, but the overall debt load continues to grow.

Stakeholders, including donor nations and multilateral institutions, are watching the figures closely. The United Kingdom, for example, announced plans to champion a “new drive on debt” during its upcoming G20 presidency, linking the initiative to broader development and historical justice concerns.

What happens next

The World Bank’s International Debt Report 2026 calls for heightened monitoring of debt sustainability and urges policy measures to mitigate rising borrowing costs. While the report does not specify concrete actions, it highlights the need for coordinated international efforts to address debt‑service pressures. The UK’s forthcoming G20 agenda may include discussions on debt relief and financing reforms, reflecting the growing attention to the issue among major economies.

The data also suggest that future reports will continue to track the evolution of private‑creditor involvement and interest‑rate trends, providing a basis for policy responses aimed at preserving fiscal space for development.