Developing Countries Owe a Record $9.4 Trillion as Poorest Nations Face Highest Borrowing Costs Since 1989
Direct answer
Developing countries now owe a record $9.4 trillion to foreign lenders, the World Bank said on November 5, 2026. The poorest countries are paying the highest borrowing costs since 1989, even though lending has reopened to them. In simple terms, developing nations borrowed more, and the poorest among them paid the most for it.
What happened
The World Bank published its annual International Debt Report 2026 on November 5, 2026. Here are the main figures from the report.
External debt of low and middle income countries rose 5.5 percent in 2025 to a record $9.4 trillion. That was the fastest increase since 2021 and about four times the average pace of 2022 to 2024.
Private lending drove much of the rise. Bond issuance from public entities rose nearly 35 percent to $251 billion, the highest level in five years, as markets reopened to many developing countries.
The poorest countries were hit hardest. External debt in countries eligible for low cost loans from the World Bank’s International Development Association, known as IDA, rose 8.1 percent to $1.3 trillion. These countries paid an average of 8.2 percent on new private creditor commitments in 2025, the highest rate since 1989, and 9.4 percent on new bonds.
By contrast, developing countries that borrow only on standard terms from the World Bank paid an average of 5.5 percent on new bonds, down from 5.8 percent the year before.
Debt payments stayed heavy. Low and middle income countries paid $1.4 trillion in principal and interest in 2025, the fifth annual increase in a row. Payments to bondholders climbed to $363 billion. Between 2022 and 2025, developing countries paid $436 billion more in debt service than they received in new financing, though 2025 itself turned to a net inflow of $45 billion.
Currency moves also played a part. More than a quarter of the $303 billion increase in public and publicly guaranteed debt reflected a weaker US dollar, which raised the dollar value of debt held in other currencies.
Why it matters for beginners
External debt is simply money a country owes to lenders outside its borders. When a country borrows, it pays interest, just like a household pays interest on a loan. The higher the interest rate, the less money is left for schools, roads, hospitals and jobs.
That is the core warning in this report. The World Bank’s chief statistician, Haishan Fu, said access to finance has improved but the price of that finance has not, and that low and middle income countries are borrowing more, paying more, and in many cases leaving less for long term development.
It also matters for investors. High borrowing costs can slow growth in emerging markets, and that can affect global companies, commodity prices and the funds that hold emerging market bonds and stocks. When the poorest countries pay 9.4 percent on new bonds while richer developing countries pay 5.5 percent, the gap shows how much risk lenders see in each group.
For comparison at home, government debt is a global theme. The United States national debt has also passed $40 trillion, as covered in our earlier report on US debt passing $40 trillion. The difference is that the United States borrows in its own currency at much lower rates, while the poorest countries borrow in foreign currency at far higher ones.
What to watch next
First, watch whether bond issuance keeps running hot in 2026. By mid August 2026, more than 10 developing countries had already passed their full year 2025 bond issuance, and several others had returned to international markets.
Second, watch global interest rates. If major central banks cut rates, borrowing costs for developing countries could ease. If rates stay high, debt payments will keep squeezing budgets.
Third, watch for debt relief talks. When the poorest countries pay the highest rates since 1989, pressure grows for lenders and governments to find ways to lower the burden.
FAQ
What is external debt?
External debt is money owed by a country’s government, companies and people to lenders in other countries. It includes loans from banks, bonds sold to foreign investors, and loans from institutions like the World Bank.
What does IDA eligible mean?
IDA is the World Bank’s fund for the poorest countries. IDA eligible countries are those poor enough to qualify for low cost or zero interest loans. About 75 countries qualify, and they are the ones paying the highest borrowing costs in this report.
Why do poor countries pay higher interest rates?
Lenders charge more when they see more risk. Poorer countries often have weaker currencies, smaller economies and a higher chance of repayment problems, so investors demand a higher return to lend to them.
Does this affect my investments?
It can, indirectly. If you hold an emerging market fund or a global bond fund, the health of developing country debt affects its value. It also affects global growth, which feeds into company earnings everywhere. This article is educational only and is not investment advice.
Sources
World Bank, Developing Countries’ External Debt Surges to Record $9.4 Trillion, press release, November 5, 2026. Reuters, Developing countries’ external debt hit record $9.4 trillion in 2025, World Bank says, November 5, 2026.
This article is for general information and education only. It is not legal or financial advice.
