Washington, D.C. · 3 December 2025 — The World Bank released its International Debt Report (IDR) 2025 on 3 December 2025, revealing that developing countries paid out $741 billion more in principal and interest on their external debt than they received in new financing between 2022 and 2024 — the largest negative net transfer in at least half a century. The report, the World Bank's premier annual publication on debt, documents a global financial architecture in which the world's poorest nations are bleeding capital to creditors at unprecedented rates.
The findings paint a stark picture: in 2024, the combined external debt of low- and middle-income countries (LMICs) reached an all-time high of $8.9 trillion, while the 78 mainly low-income countries eligible to borrow from the World Bank's International Development Association (IDA) saw their external debt stock rise to a record $1.2 trillion — a 2.0 percent increase from the previous year.
The Interest Burden
In 2024 alone, developing countries paid a record $415 billion in interest — resources that could have funded schooling, primary healthcare, and essential infrastructure. The average interest rate that developing economies will pay to their official creditors on newly contracted public debt stood at a 24-year high, while the average paid to private creditors reached a 17-year high.
The report's finding that debt servicing directly impacts food security underscores the human cost of the debt crisis. When governments divert resources to interest payments, they are not merely making abstract fiscal trade-offs — they are reducing the resources available for social safety nets, agricultural support, and nutrition programmes that sustain the most vulnerable populations.
Record Debt Restructurings
Despite the grim aggregate figures, the report noted that most countries gained some breathing room on their debt in 2024 as interest rates peaked and bond markets reopened. This enabled many to stave off default risk through restructuring. In total, developing countries restructured $90 billion in external debt in 2024 — more than in any year since 2010.
Most restructuring agreements involved IDA-eligible countries, with nations including Haiti, Ghana, Somalia, and Sri Lanka securing deals that significantly reduced their long-term external debt. Some countries saw their long-term external debt cut by as much as 70 percent through these processes.
The Shift to Domestic Debt
A significant structural shift documented in the report is the growing reliance of developing countries on domestic creditors — local commercial banks and financial institutions — as external financing becomes scarcer and more expensive. Of 86 countries for which domestic-debt data are available, more than half saw their domestic government debt grow faster than external government debt.
Official bilateral creditors — mainly governments and government-related entities — retreated after participating in the wave of restructurings. In 2024, bilateral creditors took in $8.8 billion more in principal and interest than they disbursed in new financing for developing countries. Traditional bilateral lending fell to its lowest level since the global financial crisis, with flows to IDA-eligible countries dropping to under $2 billion.
Haishan Fu, the World Bank Group's Chief Statistician and Director of its Development Data Group, offered a measured assessment:
"The rising tendency of many developing countries to tap domestic sources for their financing needs reflects an important policy accomplishment. It shows their local capital markets are evolving. But heavy domestic borrowing can spur domestic banks to load up on government bonds when they should be lending to the local private sector. Domestic debt also comes with shorter maturities, which can raise the cost of refinancing. Governments should be careful not to overdo it."
This shift carries both opportunities and risks. On one hand, deeper domestic debt markets reduce exposure to exchange rate volatility and external financial shocks. On the other, they create the bank-sovereign nexus that the IMF independently flagged in its October 2025 Regional Economic Outlook — a feedback loop where sovereign and banking sector vulnerabilities reinforce each other.
Bond Markets Reopen — at a Price
Bond investors pumped in $80 billion more in new financing than they received in principal repayments and interest in 2024, helping several countries complete multi-billion-dollar bond issuances. However, this financing came at a steep cost: interest rates hovered around 10 percent, approximately double the rates prevailing before 2020.
The World Bank as Lender of Last Resort
With low-cost financing becoming harder to obtain, multilateral development banks have become even more critical. The World Bank was the single-largest provider of financing for IDA-eligible countries in 2024, providing a record $18.3 billion more in new financing to these countries than it received in principal and interest payments. It also provided a record $7.5 billion in grants.
This expanding role underscores the centrality of multilateral institutions in the current development finance architecture. As bilateral creditors retreat and private markets remain selective and expensive, the World Bank and other multilateral development banks are filling a gap that would otherwise leave the poorest countries without any access to affordable financing.
A Warning from the Chief Economist
Indermit Gill, the World Bank Group's Chief Economist and Senior Vice President for Development Economics, issued a pointed warning:
"Global financial conditions might be improving, but developing countries should not deceive themselves: they are not out of danger. Their debt build-up is continuing, sometimes in new and pernicious ways. Policymakers everywhere should make the most of the breathing room that exists today to put their fiscal houses in order — instead of rushing back into external debt markets."
Gill's caution against rushing back into external debt markets is particularly relevant for African economies. Several countries that have completed or are nearing completion of debt restructuring processes are already considering new international bond issuances. The World Bank's chief economist is effectively cautioning that the structural conditions that led to debt distress have not been resolved, and that new borrowing — even at currently available rates — could reproduce the crisis.
Report Scope and Data
The IDR 2025 covers external debt stocks and flows for the period 2014–2024, with debt dynamics analysis, policy implications for 2025 and beyond, and an update on the global debt transparency agenda. The report includes one-page summaries per country and aggregate data for regions and income groups, covering the years 2010 and 2020–2024. The associated International Debt Statistics (IDS) database provides the most comprehensive and transparent source of cross-comparable external debt data for low- and middle-income countries.
The World Bank also released results from a DRS Global Consultation — a multi-year effort with the IMF, UNCTAD, and the Commonwealth Secretariat to modernize the Debtor Reporting System — and a new Protocol on the Handling of Creditor Data, reflecting ongoing efforts to improve debt transparency.
Sources
- World Bank, International Debt Report 2025, 3 December 2025. Available at:
- World Bank Press Release, "Developing Countries' Debt Outflows Hit 50-Year High During 2022-2024," 3 December 2025. Available at:
- World Bank Blog, "International Debt Report 2025: When Relief Isn't Enough – LMICs Face Their Largest External Debt Outflows in 50 Years," 3 December 2025. Available at:
- World Bank, "Putting debt-strapped countries on a sustainable path," December 2025. Available at:
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