Developing Countries’ Debt Hits a Record $9.4 Trillion — and the Poorest Are Paying the Highest Price in Decades

The world’s developing countries now owe more money to foreign lenders than at any point in history. New figures from the World Bank show that the external debt of developing countries jumped 5.5% to a record $9.4 trillion in 2025 — the fastest increase since 2021. The headline number is striking on its own. But the real story is what sits behind it: the poorest countries are paying the highest interest rates since the late 1980s, and billions of dollars that could have built schools, hospitals and roads are instead going to lenders.

The World Bank published the numbers on Thursday, 5 November 2026, in its annual International Debt Report 2026. The report tracks the debts that low- and middle-income countries owe to lenders outside their borders, and it paints a picture of a world where borrowing is easier to get than it has been for years — but far more expensive than it used to be.

The headline numbers

Here are the key figures from the World Bank’s International Debt Report 2026:

• Total external debt: $9.4 trillion in 2025, up 5.5% on the year before. That is the fastest growth since 2021, and roughly four times the average pace recorded between 2022 and 2024.
• Debt payments: Low- and middle-income countries paid a combined $1.4 trillion in principal and interest in 2025. That was up 1.9% on the year before, and the fifth annual increase in a row. Of that total, $363 billion went to bondholders alone.
• New bond borrowing: Governments and public bodies in developing countries issued nearly 35% more bonds, raising $251 billion — the highest level in five years.
• Money flowing out: Between 2022 and 2025, developing countries paid $436 billion more in debt service than they received in new financing. In other words, far more money left these countries to pay old debts than arrived as new loans.

To put $9.4 trillion in perspective: it is more than the entire annual economic output of Japan, the world’s fourth-largest economy. And it is money owed not by rich countries, but by nations where many people still live without reliable electricity, clean water or basic healthcare.

Why borrowing has become so expensive

The report’s most worrying finding is not the size of the debt, but its price. After years in which many developing countries were shut out of international markets, private lenders have come back in force. Bond markets have reopened, and governments are borrowing again. But the terms are harsh — especially for the poorest borrowers.

Countries that qualify for cheap loans from the World Bank’s International Development Association (IDA) — the Bank’s fund for the world’s poorest nations — saw their external debt grow fastest of all, rising 8.1% to $1.3 trillion in 2025. And when these countries borrowed from private lenders, they paid an average interest rate of 8.2% on new loans. That is the highest rate since 1989.

When the same countries borrowed by selling bonds on international markets, the cost was higher still: an average of 9.4%. By contrast, better-off developing countries that borrow only from the World Bank’s non-concessional arm, the International Bank for Reconstruction and Development (IBRD), paid an average of 5.5% on new bonds — down from 5.8% the year before.

The gap tells the story. In 2016, the difference between what the poorest countries paid private lenders and what they paid official lenders was 3.4 percentage points. By 2025, it had widened to 5.5 percentage points. The poorest countries are paying a growing premium simply because they are poor — and lenders see them as risky.

Some recent examples from the report show just how steep the price can be. Laos borrowed at an interest rate of 11.5%. Kenya borrowed at 9.2%. And the Republic of Congo borrowed at 13.88% — a rate that would be unthinkable for a rich-country government, which typically borrows at a fraction of that cost.

Haishan Fu, the World Bank Group’s chief statistician, summed up the problem in the Bank’s announcement: “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.”

The poorest countries are being squeezed hardest

The burden is falling hardest on the countries least able to carry it. The World Bank says the world’s 26 poorest economies are now facing their heaviest debt burden since 2006 — the year before a landmark international deal wiped out much of their debt.

At the same time, the foreign aid that once helped these countries has shrunk to a two-decade low as a share of their economies. So the poorest nations are borrowing more, at higher rates, while receiving less help.

Ayhan Kose, the World Bank’s deputy chief economist, said low-income economies “can and must do much for themselves, but also need stronger help from abroad.”

The squeeze shows up in everyday life. When a government spends a large share of its budget paying interest to foreign lenders, there is less money for everything else — for teachers’ salaries, for medicine in clinics, for repairing roads, for building power lines. The World Bank warns that rising debt payments are already squeezing spending on health, education and infrastructure in many developing countries.

This is not a problem for one region alone. The report’s country tables show the pressure spreading across the map. India’s external debt stood at $763.5 billion in 2025, up from $717.4 billion the year before. Nigeria’s external debt reached $145 billion in 2025, a rise of 6.6%. Pakistan’s external debt has nearly doubled in a decade to about $135 billion, according to the same World Bank data — a story Findivoza covered earlier this week.

Why markets reopened — and why that is not all good news

If borrowing is so expensive, why are developing countries borrowing so much? Part of the answer is that they have little choice. Governments need money to keep services running, to pay for imports such as fuel and food, and to refinance old debts as they fall due. When a bond matures, a country often has to borrow again simply to pay back the old bond.

Part of the answer is that markets have genuinely reopened. After a period in which many developing countries struggled to borrow at all, investors have returned, hungry for the higher returns these bonds offer. Long-term debt flows turned positive in 2025, with a net inflow of $45 billion after an outflow of $118 billion in 2024. Bond issuance by public bodies jumped to $251 billion, the highest in five years.

But the World Bank cautions that easier access to money should not be mistaken for lower risk. The Bank’s data shows that repayment bills are still rising into 2026, and preliminary figures suggest lending has continued at a rapid pace this year — at continued high interest rates.

There is another twist in the numbers. More than a quarter of the $303 billion increase in public and publicly guaranteed debt in 2025 was not new borrowing at all. It was the weaker US dollar pushing up the dollar value of debts held in other currencies. When the dollar falls, debts counted in euros, yen or other currencies look bigger in dollar terms, even though nothing new was borrowed. It is a reminder that developing countries’ debts can grow for reasons entirely outside their control — a currency swing in Washington can add billions to a poor country’s debt bill overnight.

What happens next

The early signs for 2026 suggest the pressure is not easing. The World Bank’s preliminary data shows that borrowing continued at a rapid pace this year, with high interest rates still in force. By mid-August 2026, more than 10 developing countries had already raised more money from bond markets than in the whole of 2025, and several others returned to international markets after long absences.

That raises hard questions for governments, lenders and international institutions. If the poorest countries must pay 8% or 9% — or even 14% — to borrow, how can they ever invest enough to grow their way out of debt? And if debt payments keep rising faster than new financing arrives, as they have for four years running, how long can that continue before something breaks?

The World Bank’s report does not offer easy answers. But it makes the scale of the problem clear: $9.4 trillion of debt, $1.4 trillion a year in repayments, and the heaviest burden falling on the countries that can least afford it. For the world’s poorest people, the cost of that debt is measured not in trillions, but in the classrooms, clinics and clean water that never get built.

Frequently asked questions

What is external debt?

External debt is money that a country’s government, businesses and banks owe to lenders in other countries — foreign governments, international banks, bondholders and institutions such as the World Bank. It is different from domestic debt, which a government owes to lenders inside its own country.

Which countries does the World Bank report cover?

The International Debt Report covers low- and middle-income countries that report their debts to the World Bank’s Debtor Reporting System. That includes most of Africa, much of Asia — including Pakistan and India — Latin America and parts of Eastern Europe.

What is IDA, and why does it matter?

IDA stands for the International Development Association, the World Bank’s fund for the world’s poorest countries. It lends money on very cheap terms — low interest rates and long repayment periods — to countries that cannot afford to borrow on normal market terms. The report shows that IDA-eligible countries are now borrowing heavily from private lenders instead, at far higher rates.

Why are interest rates so high for poor countries?

Lenders charge higher rates when they think there is a bigger risk they will not be paid back. Poor countries often have weaker economies, less stable revenues and a history of debt trouble, so private lenders demand a higher return to lend to them. The result is a vicious circle: high rates make debts harder to repay, which makes lenders see the country as riskier still.

Does this debt crisis affect ordinary people?

Yes, directly. When a government spends more on interest payments, it has less to spend on schools, hospitals, roads and other public services. High debt can also push up prices and weaken a country’s currency, making imported food and fuel more expensive for everyone.

Conclusion

The World Bank’s International Debt Report 2026 is a warning wrapped in a record number. Developing countries owe $9.4 trillion — more than ever before — and they are paying more than ever to service it. The return of private lending is welcome in one sense: countries shut out of markets can borrow again. But when the poorest borrowers pay 8.2% on new loans and 9.4% on new bonds, while richer developing countries pay 5.5%, the system is charging the most to those who can least afford it.

For Pakistan and its neighbours, the message is the same as for the rest of the developing world: the money is available, but the price is steep — and the bill keeps growing. Unless borrowing costs come down or debts are restructured, more and more of these countries’ budgets will go to lenders abroad, and less to the people at home.

Sources

• World Bank, “Developing Countries’ External Debt Surges to Record $9.4 Trillion”, press release, 5 November 2026: https://www.worldbank.org/en/news/press-release/2026/11/05/developing-countries-external-debt-surges-to-record-9-4-trillion
• Devdiscourse, “Borrowing Costs Bite: Developing Countries’ External Debt Hits Record $9.4 Trillion”, 6 November 2026: https://www.devdiscourse.com/article/business/4002499-borrowing-costs-bite-developing-countries-external-debt-hits-record-94-trillion
• Trade News, “Debt of poorest countries at record $9.4tn high, World Bank data shows”, 5 November 2026: https://www.trade-news.net/debt-of-poorest-countries-at-record-9-4tn-high-world-bank-data-shows/
• The Guardian, “Debt of poorest countries at record $9.4tn high, World Bank data shows”, 5 November 2026: https://www.theguardian.com/business/2026/nov/05/developing-country-debt-record-94tn-high-world-bank-data
• BizzBuzz, “Developing nations’ foreign debt hits $9.4 trillion — World Bank”, 6 November 2026: https://www.bizzbuzz.news/economy/developing-nations-foreign-debt-hits-94-trillion-world-bank-1414207

This article is for general information and education only. It is not legal or financial advice.