Developing economies’ external debt rose 5.5% in 2025 to an unprecedented $9.4 trillion, marking the sharpest increase since 2021 and underscoring the growing financial pressure on lower-income borrowers.
Debt climbs as financing remains costly
International borrowing conditions have become more accessible, but funding has not become cheaper. The rising debt load in the poorest economies is putting spending on critical human-development priorities at risk, including investments in health, education and other long-term needs.
Countries eligible for concessional support from the World Bank’s International Development Association, or IDA, saw their external debt expand by 8.1% to $1.3 trillion.
- Total external debt across developing countries reached $9.4 trillion in 2025.
- The annual rise was 5.5%, the fastest growth rate in four years.
- Debt in the most financially vulnerable IDA-eligible countries increased 8.1%, reaching $1.3 trillion.
Rising repayments constrain development spending
Haishan Fu, the World Bank Group’s chief statistician and director of Development Data, said many countries are taking on more borrowing while facing higher servicing costs, reducing the funds available for durable economic development.
“Responsible debt management means ensuring that all people — including those in future generations — have an opportunity to prosper,” Fu said.
Developing countries paid $1.4 trillion in principal and interest during 2025, an increase of 1.9% from the previous year. Payments to bondholders reached $363 billion, partly because governments used fresh bond issuance to finance debt repurchases and early repayments.
Bond-market return brings limited net relief
Despite expensive market financing, low- and middle-income governments continued to pursue bond funding. By August, more than 10 countries had already issued more debt than their full-year 2025 totals, while several borrowers that had been absent from global markets returned to issue international bonds.
The financing picture over recent years remained difficult:
- From 2022 through 2025, developing economies paid $436 billion more in debt service than they received through new financing.
- That pattern changed in 2025, when net debt flows turned positive.
- Developing countries recorded a net inflow of $45 billion during the year.
