Developing-World Debt Hits a Record $9.4 Trillion, and the Poorest Nations Pay the Most to Borrow Since 1989

The developing world's debt pile grew to a record $9.4 trillion last year, the World Bank said on Wednesday, as private creditors returned to emerging markets in force. But the benefits of that reopened spigot are flowing unevenly, and the countries that need cheap money most are paying the steepest prices in decades.

In its International Debt Report 2026, the bank said external debt owed by developing countries jumped 5.5% in 2025, the fastest pace since 2021 and roughly four times the average of the preceding three years. For the poorest nations, however, the cost of fresh borrowing climbed to levels last seen in the late 1980s.

A market reopening, on new terms

Private financing drove most of the increase. Bond issuance by public entities in developing countries climbed nearly 35% to $251 billion, the highest in five years, as international markets that had been largely closed to many borrowers swung back open.

Much of the new borrowing recycled old obligations rather than funding new investment. The bank said many governments sold bonds to buy back maturing debt, stretching out repayment schedules without shrinking their debt loads, and often locking in higher interest rates in the process. Early 2026 data point to continued appetite: by mid-August, more than ten low- and middle-income countries had already issued more international bonds than they had in all of 2025.

The poorest pay the most

The burden is landing hardest on the countries least able to carry it. External debt grew fastest in nations eligible for concessional support from the bank's International Development Association (IDA), rising 8.1% to $1.3 trillion.

Those IDA-eligible countries paid an average of 8.2% on new loans from private creditors in 2025, the highest since 1989, and 9.4% on new bond issues. Countries eligible only for the bank's non-concessional lending paid 5.5% on new bonds, and even that represented an improvement from 5.8% a year earlier. The gap between what the poorest nations pay official lenders and what they pay private markets has widened from 3.4 percentage points in 2016 to 5.5 points last year.

More going out than coming in

Debt-service costs are consuming a growing share of government budgets. Low- and middle-income countries paid $1.4 trillion in principal and interest in 2025, a fifth consecutive annual increase, with $363 billion of that going to bondholders alone.

For several years the outflow dwarfed new money: between 2022 and 2025, developing countries paid $436 billion more in debt service than they received in fresh financing. The direction only reversed in 2025, when long-term debt flows swung from a $118 billion net outflow to a $45 billion net inflow.

The headline figures also got a boost from currency markets. More than a quarter of the $303 billion increase in public and publicly guaranteed debt reflected the weaker US dollar, which inflated the dollar value of obligations denominated in other currencies. For several of the largest concessional borrowers, those valuation effects outweighed the principal they actually repaid.

What is at stake

For the World Bank, the danger is that expensive money crowds out development itself. "These countries are borrowing more, paying more, and in many cases leaving less for long-term development," said Haishan Fu, the institution's chief statistician.

With governments devoting more to servicing old debts than to building schools, clinics, and power grids, the record debt pile of 2025 risks looking less like a return to financial health than an expensive way of standing still.