Tashkent, Uzbekistan (UzDaily.uz) — The total external debt of developing countries rose by 5.5% in 2025 to a record US$9.4 trillion, marking the fastest increase since 2021 and approximately four times the average annual growth recorded in 2022–2024. The figures are presented in the World Bank's International Debt Report 2026, published on 5 November.
Borrowing from private creditors accounted for most of the increase. Bond issuance by public-sector entities in developing countries rose by nearly 35% to US$251 billion, the highest level in five years, indicating that many governments have returned to international capital markets.
However, access to financing recovered faster than borrowing conditions improved. The most vulnerable countries continued to face particularly high debt-servicing costs. External debt in countries eligible for concessional financing from the International Development Association (IDA) increased by 8.1% to US$1.3 trillion.
In 2025, these countries paid an average annual interest rate of 8.2% on new borrowing from private creditors, the highest level since 1989. Average interest rates on new bond issues reached 9.4%.
The gap between borrowing costs from official and private creditors widened from 3.4 percentage points in 2016 to 5.5 percentage points in 2025.
By comparison, countries eligible only for financing from the International Bank for Reconstruction and Development (IBRD) issued new bonds at an average interest rate of 5.5%, down from 5.8% a year earlier.
Debt-servicing pressures continued to increase amid elevated global interest rates. In 2025, low- and middle-income countries paid US$1.4 trillion in principal and interest, up 1.9% from the previous year. This marked the fifth consecutive year of rising debt-service payments.
Payments to bondholders reached US$363 billion. This was partly driven by debt buybacks and early repayments financed through the issuance of new bonds.
Between 2022 and 2025, developing countries paid US$436 billion more in debt service than they received in new financing. However, the trend reversed in 2025, when net outflows from long-term debt flows, which had reached US$118 billion in 2024, turned into net inflows of US$45 billion.
Currency fluctuations also affected external debt dynamics. More than a quarter of the US$303 billion increase in public and publicly guaranteed debt was attributed to the weakening of the US dollar. This raised the dollar value of liabilities denominated in other currencies.
Haishan Fu, Chief Statistician of the World Bank Group and Director of Development Data, said the return of private lending was creating additional opportunities for developing countries but was also increasing borrowing volumes and debt-servicing costs. As a result, many governments had fewer resources available for long-term investment in development and social sectors.
The World Bank also noted that demand for international bond financing remained strong in early 2026 despite high borrowing costs.
By mid-August, more than 10 countries had already exceeded their total bond issuance for 2025, while some governments had returned to international capital markets.
