Developing countries are ending 2025 under severe financial pressure, having spent $741 billion more on external debt service between 2022 and 2024 than they received in new financing — a trend that is increasing economic vulnerability and shrinking fiscal space across emerging markets.
The magnitude of the shortfall is outlined in the World Bank’s latest International Debt Report, released in December, which warns that low- and middle-income economies are experiencing their most intense financing pressures in decades, as rising interest costs and limited access to credit tighten conditions.
The report highlights escalating fiscal strain, with interest payments alone surging to $415 billion, diverting funds from critical sectors such as health, education, and infrastructure.
External debt stocks hit a record $8.9 trillion, including $1.2 trillion owed by 78 low-income countries eligible for IDA support.
Although global interest rates peaked in 2024 and international bond markets briefly reopened, the relief came at a high cost. Investors provided $80 billion in net new financing, but at average yields around 10%, well above pre-2020 levels.
Meanwhile, countries undertook $90 billion in debt restructurings — the highest since 2010 — in an effort to avoid defaults.
The human impact is intensifying: in the 22 most heavily indebted countries, 56% of people cannot afford the minimum daily diet required for healthy living, highlighting the social consequences of rising debt and tightening global financial conditions.
