Developing Countries’ External Debt Hits Record $9.4trn in 2025 – World Bank
The World Bank Group said external debt of developing countries rose 5.5 per cent to a record $ 9.4 trillion in 2025, marking the fastest increase since 2021.
The World Bank disclosed this in its International Debt Report (IDR) 2026 released on Thursday, noting that the increase was about four times the average recorded between 2022 and 2024.
The report said that although access to international finance had improved, the cost of finance had not.
It said mounting debt burdens threatened to reduce investment in essential services and human development in the poorest countries. It attributed much of the increase to private financing, with borrowing from private creditors rising significantly.
The report also said bond issuance by public entities rose nearly 35 per cent to 251 billion dollars, the highest level in five years.
According to the report, external debt grew fastest among the most vulnerable economies.
“It rose by 8.1 per cent to 1.3 trillion dollars in countries eligible for concessional financing from the World Bank Group’s International Development Association (IDA).”
Commenting on the development, Haishan Fu, the group’s Chief Statistician and Director of Development Data, said the return of private lending to low- and middle-income countries was welcome but came with high financial costs.
“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.
“Managing debt responsibly means giving everyone, including future generations, a chance to thrive,’ ‘ he said.
The report said that several governments issued new bonds to repurchase maturing debt, thereby spreading repayment obligations over longer periods without significantly reducing overall debt stocks.
It, however, said that such refinancing arrangements often came with higher interest rates.
“Early 2026 data indicated continued demand for international bond financing among low-and middle-income countries despite the high borrowing costs.
“By mid-August, more than 10 countries had exceeded their total bond issuance for the whole of 2025, while several others had returned to international financial markets.”
The report further said that IDA-eligible countries paid an average interest rate of 8.2 per cent on new commitments from private creditors in 2025, the highest since 1989.
It said interest rates on new bonds averaged 9.4 per cent.
“The gap between the interest rates paid by IDA-eligible countries to official and private creditors widened from 3.4 percentage points in 2016 to 5.5 percentage points in 2025.
“In comparison, countries eligible for only non-concessional loans from the International Bank for Reconstruction and Development (IBRD) paid an average of 5.5 per cent on new bonds, improving from 5.8 per cent in 2024.”
On debt servicing, the report said low- and middle-income countries paid 1.4 trillion dollars in principal and interest in 2025, representing a 1.9 per cent increase and the fifth consecutive annual rise.
“Payments to bondholders also increased to 363 billion dollars, partly reflecting debt buybacks and advance repayments financed through new bond issuances.”
It said that developing countries paid 436 billion more in debt service than they received in new financing between 2022 and 2025.
It said the trend changed in 2025 as long-term debt flows shifted from a net outflow of $ 118 billion in 2024 to a net inflow of $ 45 billion.
The World Bank report also identified currency movements as a contributing factor to the increase in reported debt.
It said more than one-quarter of the $ 303 billion increase in public and publicly guaranteed debt resulted from a weakening U.S. dollar, which increased the dollar value of debt denominated in other currencies.
“For some of the largest concessional borrowers, these currency-related effects outweighed the principal they repaid in 2025, leaving their reported debt higher despite continued debt servicing.”
The report said Nigeria’s external debt stock stood at 145,015 million in 2025, up 6.6 per cent from 2024. It said Nigeria’s external debt had grown steadily over the past decade, rising from 83,213 million dollars in 2015.
“Of the total debt stock, 62,400 million dollars was public and publicly guaranteed debt, while private nonguaranteed debt accounted for 54,674 million dollars and short-term debt stood at 28,139 million dollars.
“Multilateral creditors accounted for 31,365 million dollars of public debt, including 18,533 million dollars owed to the World Bank’s IDA.” The report said China was Nigeria’s largest bilateral creditor, with $ 5,672 million.
It said Nigeria’s external debt-to-Gross National Income(GNI) ratio stood at 51 per cent, down by 6.6 per cent in 2024, while external debt was equivalent to 212 per cent of exports (goods, services, and primary income).
The report said Debt service (principal and interest) accounted for 19 per cent of exports in 2025, highlighting the pressure repayment obligations put on foreign exchange earnings.
The report also said the cost of new borrowing varied significantly by creditor.
In 2025, loans from official creditors carried an average interest rate of 1.9 per cent, compared with 9.6 per cent for private creditors, underscoring the higher cost of accessing commercial financing.
The IDR is an annual World Bank publication that provides external debt statistics and analysis for low- and middle-income countries reporting to the institution’s Debtor Reporting System (DRS).
Drawing on data collected through the DRS, the publication tracks borrowing patterns, emerging lending instruments, debt relief initiatives and best practices in debt recording and reporting.
The 2026 edition analyses external debt stocks and flows as of the end of 2025, examines debt dynamics and their policy implications, and updates the global debt transparency agenda. #Developing Countries’ External Debt Hits Record $9.4trn in 2025 – World Bank#
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