Developing country debt hits record $9.4 trillion as poorest pay highest rates since late 1980s

A record debt load

Developing countries owed a record $9.4 trillion to external creditors in 2025, according to the World Bank's annual International Debt Report, an increase of 5.5% on the year before. That was the fastest rise in four years. Borrowing from private creditors jumped, and the poorest nations regained access to bond markets. The figure covers borrowing from foreign creditors rather than domestic lending. Public bond issuance rose by more than a third to $251 billion, the highest level in five years.

Costs at a multi-decade high

The poorest countries, those eligible for concessional World Bank lending, paid an average interest rate of 8.2% on new borrowing, the highest since the late 1980s. Preliminary data for 2026 show lending continuing at a brisk pace, but at still-high rates as global financing costs rose. The bank pointed to recent deals by Laos at 11.5%, the Republic of Congo at 13.88% and Kenya at 9.2%. The chart sets out those three rates.

Republic of Congo13.88%

Laos11.5%

Kenya9.2%

Republic of Congo

13.88 %

Laos

11.5 %

Kenya

9.2 %

Data from the article text

Government bond yields have also risen across the globe, as inflation worries tied to the Iran war, higher policy rates and rising public debt pushed up borrowing costs. Yields have reached levels not seen in years, adding pressure on wealthy economies such as the United States, France and Germany. The World Bank's Haishan Fu put the trade-off plainly.

“Access to international finance has improved, but the price of that finance has not.”

Debt service and squeezed budgets

Data from early 2026 showed strong demand from poorer countries for new financing. Low- and middle-income countries paid roughly $1.4 trillion in principal and interest in 2025, the fifth consecutive annual increase. By mid-August more than ten countries had already exceeded their total bond issuance for the whole of 2025. Many governments issued bonds to repay existing debt, often at higher interest rates, the report says. The bank warns that rising servicing costs are holding some governments back from investment that would pay off later. Its analysis also found that global shocks hit food availability harder in heavily indebted countries. Heavily indebted nations, the bank suggests, see healthy food become harder to afford when the world economy is under strain.

Britain's push for a new debt deal

Prime Minister Andy Burnham has appointed Gordon Brown, a former Labour prime minister, to test whether changes to the global debt system are feasible before Britain's G20 presidency next year. Burnham has linked the effort to confronting the legacy of slavery, and the government plans to champion what it calls a "new drive on debt" during that presidency. Foreign Secretary Ed Miliband set out plans in October 2026 for a "new deal" for heavily indebted countries in a speech at the IMF annual meetings in Bangkok. That package is expected to involve using the balance sheets of the World Bank and other multilateral development banks to unlock more finance.