Washington, D.C. – December 3, 2025: Developing countries paid out $741 billion more in principal and interest on external debt than they received in new financing between 2022 and 2024—the largest gap in at least five decades, according to the World Bank’s latest International Debt Report.
Despite this record outflow, many countries gained temporary relief in 2024 as interest rates peaked and bond markets reopened. This allowed several nations to restructure debt worth $90 billion—the highest level since 2010—and issue new bonds totaling $80 billion. However, borrowing costs remained steep, with interest rates averaging around 10%, nearly double pre-2020 levels.
“Global financial conditions might be improving, but developing countries should not deceive themselves: they are not out of danger,” cautioned Indermit Gill, World Bank Group Chief Economist and Senior Vice President for Development Economics. “Policymakers should use this breathing room to strengthen fiscal discipline instead of rushing back into external debt markets.”
Rising Debt Burden
The report shows that the combined external debt of low- and middle-income countries reached a record $8.9 trillion in 2024. Of this, $1.2 trillion was owed by the 78 most vulnerable countries eligible to borrow from the World Bank’s International Development Association (IDA). Interest rates on newly contracted public debt hit a 24-year high for official creditors and a 17-year high for private creditors.
Developing nations paid $415 billion in interest alone—funds that could otherwise have supported education, healthcare, and infrastructure. In the most indebted countries, where external debt exceeds 200% of export revenue, more than half the population cannot afford the minimum daily diet required for long-term health.
World Bank Support
The World Bank emerged as the largest provider of net new financing to IDA-eligible countries, disbursing $18.3 billion more in new financing than it received in repayments in 2024, alongside $7.5 billion in grants. By contrast, official bilateral creditors withdrew, taking in $8.8 billion more than they disbursed, following a wave of debt restructurings that reduced long-term obligations by up to 70% in some cases.
With external financing options shrinking, many countries turned to domestic creditors. Of 86 countries with available data, more than half saw domestic government debt grow faster than external debt. While this reflects stronger local capital markets, the World Bank warned that excessive reliance on domestic borrowing could crowd out private sector lending and increase refinancing risks due to shorter maturities.
“Heavy domestic borrowing can spur banks to load up on government bonds when they should be lending to the private sector,” said Haishan Fu, World Bank Group Chief Statistician and Director of the Development Data Group. “Governments should be careful not to overdo it.”
Human Impact
The report underscores the social consequences of high debt burdens. In 18 of the 22 most indebted countries—nearly all IDA-eligible—two-thirds of the population cannot afford a healthy daily diet, highlighting the direct link between debt distress and poverty.
The full International Debt Report is available at: World Bank Debt Statistics.