Private creditors are making a strong comeback, bond markets are reopening, and the debt of the poorest countries has reached its highest level in decades.<\/strong><\/i><\/p>

According to the World Bank Group's International Debt Report 2026, external borrowing by developing countries surged by 5.5% to reach a record amount of 9.4 trillion dollars in 2025. This is the fastest growth since 2021 and nearly four times the average recorded over the 2022–2024 period. While access to international financing has improved, its cost remains high, and the heavy debt burden of the poorest countries could undermine essential investments in human capital.<\/p>

Private creditors largely explain this increase. Borrowing from them has risen sharply, while public entity bond issuances have increased by nearly 35% to reach their highest level in five years, totaling 251 billion dollars, thanks to the reopening of markets to many developing countries. External debt has grown even faster in the most vulnerable countries, increasing by 8.1% to reach 1.3 trillion dollars in countries eligible for concessional financing from the International Development Association (IDA) of the World Bank Group.<\/p>

“The return of private lending to low and middle-income countries is good news, but these countries are borrowing more, paying more, and, in many cases, devoting fewer resources to long-term development,” emphasizes Haishan Fu, chief statistician of the World Bank Group and head of the Development Data Department. “Managing debt responsibly means giving everyone, including future generations, a chance to thrive.”<\/p>

Many governments have issued new bonds to refinance maturing debts, better distributing repayment schedules without actually reducing the total amount of debt, and often at higher interest rates. Despite these costs, data collected at the beginning of 2026 show that demand for international bond financing remains strong in low and middle-income countries. By mid-August, more than 10 countries had already exceeded their issuance volume for the entire year of 2025, while several others were returning to international markets.<\/p>

In 2025, IDA-eligible countries faced an average interest rate of 8.2% — the highest since 1989 — on new commitments with private creditors and 9.4% on new bonds. The gap between the rates paid by these countries to public creditors and those in the private sector widened from 3.4 percentage points in 2016 to 5.5 percentage points in 2025.<\/p>

By comparison, countries eligible only for non-concessional loans from the International Bank for Reconstruction and Development (IBRD) of the World Bank Group borrowed at an average rate of 5.5% on their new bonds, down from 5.8% the previous year.<\/p>

Debt repayment and interest payment pressures remained strong in a context of high global interest rates. Low and middle-income countries paid 1.4 trillion dollars in principal and interest in 2025, an increase of 1.9% and a fifth consecutive annual rise. Payments to bondholders reached 363 billion dollars, partly due to debt buybacks and early repayments financed by new bond issuances.<\/p>

Between 2022 and 2025, developing countries paid 436 billion dollars more in debt service than they received in new financing. However, the trend reversed in 2025: long-term debt flows shifted from net outflows of 118 billion dollars in 2024 to net inflows of 45 billion dollars.<\/p>

Exchange rate fluctuations also contributed to the recorded increase. Of the 303 billion dollar rise in public debt and state-guaranteed debt, over a quarter is due to the weakening of the US dollar, which has increased the dollar value of debt denominated in other currencies. For several of the largest concessional borrowers, these exchange rate effects exceeded the principal repaid in 2025, so that the reported debt increased despite ongoing repayments.<\/p>

Source: banquemondiale.org<\/p>