Developing countries’ external debt surged to a record $9.4 trillion in 2025, rising 5.5% in the fastest increase since 2021, as governments returned to the international markets but faced some of the steepest borrowing costs in decades.
The World Bank Group’s International Debt Report 2026 found that private creditors drove much of the increase, with public-sector bond issuance climbing nearly 35% to $251 billion—the highest level in five years.
The heaviest burden fell on the most vulnerable borrowers. External debt in countries eligible for concessional financing from the World Bank’s International Development Association rose 8.1% to $1.3 trillion.
For these countries, new private-creditor commitments carried an average interest rate of 8.2%, the highest since 1989. New bonds cost an average of 9.4%, placing further pressure on national budgets.
“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, World Bank Group chief statistician and director of development data.
Debt-service payments remained severe. Low- and middle-income countries paid $1.4 trillion in principal and interest in 2025, marking a fifth consecutive annual increase. Payments to bondholders alone rose to $363 billion.
Between 2022 and 2025, developing countries paid $436 billion more in debt service than they received in new financing. Although long-term debt flows turned positive in 2025, the relief was limited: new financing exceeded repayments by just $45 billion.
Currency movements also inflated the reported debt total. More than a quarter of the $303 billion increase in public and publicly guaranteed debt reflected the weaker U.S. dollar, which raised the dollar value of obligations denominated in other currencies.
As international markets reopen, the report warns that access to finance is improving—but at a price many developing countries can ill afford.