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, marking the largest gap in at least 50 years, according to the World Bank’s latest International Debt Report.
Despite these historic outflows, many nations found temporary relief in 2024 as global interest rates peaked and bond markets reopened. This enabled countries to restructure $90 billion in external debt—the largest annual amount since 2010—while bond investors provided $80 billion more in new financing than they received in repayments. However, these funds came at a steep cost, with interest rates averaging around 10 percent, roughly double pre-2020 levels.
“Global financial conditions might be improving, but developing countries should not deceive themselves: they are not out of danger,” said Indermit Gill, World Bank Group Chief Economist. “Their debt build-up is continuing, sometimes in new and pernicious ways. Policymakers should use the breathing room today to put their fiscal houses in order, rather than rushing back into external debt markets.”
The report highlights that combined external debt for low- and middle-income countries reached a record $8.9 trillion in 2024, including $1.2 trillion owed by 78 mainly low-income countries eligible for World Bank International Development Association (IDA) support. Average interest rates on newly contracted public debt were at a 24-year high for official creditors and a 17-year high for private lenders. Collectively, these nations paid a record $415 billion in interest alone—resources that could have been spent on schooling, healthcare, and infrastructure. In the most highly indebted countries, roughly half of the population cannot afford the minimum daily diet for long-term health.
Low-cost financing became increasingly scarce. Multilateral development banks, including the World Bank, provided the most relief. In 2024, the World Bank extended $18.3 billion more in new financing to IDA-eligible countries than it received in repayments, alongside $7.5 billion in grants. Meanwhile, official bilateral creditors pulled back after a wave of debt restructurings that reduced long-term external debt in some countries by up to 70 percent, collecting $8.8 billion more in repayments than they disbursed.
Many developing countries turned to domestic lenders, such as local banks and financial institutions, to meet financing needs. Among 86 countries with available data, over half saw domestic government debt grow faster than external debt. While the report notes that tapping domestic markets reflects progress in building local capital markets, heavy domestic borrowing can strain local banks and increase refinancing costs due to shorter maturities.
The report also underscores the human impact of high debt. In the 22 most heavily indebted countries—where external debt exceeds 200 percent of export revenue—an average of 56 percent of people cannot afford the minimum daily diet. Among IDA-eligible nations in this group, nearly two-thirds of the population face food insecurity, highlighting the urgent need for sustainable debt management and inclusive growth strategies.
