Developing countries paid $741 billion more in external debt service than they received in new financing between 2022 and 2024, marking the largest net outflow in at least five decades, according to the World Bank’s International Debt Report released Wednesday.
Despite the pressure, many low- and middle-income countries secured short-term relief in 2024 as global interest rates peaked and international bond markets reopened. Nations restructured $90 billion in external debt, the highest level since 2010. Bond investors also injected $80 billion in net new financing, allowing several developing economies to complete major issuances — though at steep borrowing costs, with interest rates averaging about 10%, 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, the World Bank Group’s chief economist and senior vice president for development economics. “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 instead of rushing back into external debt markets.”
The report shows that the combined external debt of low- and middle-income countries reached a record $8.9 trillion in 2024, including $1.2 trillion owed by the 78 countries eligible for World Bank’s International Development Association (IDA). Interest rates on newly contracted public debt hit their highest levels in more than two decades.
Developing countries paid a record $415 billion in interest alone last year — money the Bank says could have supported schooling, health care, or essential infrastructure. In the 22 most heavily indebted countries, where external debt exceeds 200% of export earnings, an estimated 56% of the population cannot afford the minimum daily diet necessary for long-term health.
With affordable financing increasingly scarce, multilateral lenders played a crucial role. The World Bank emerged as the largest source of net new financing for IDA-eligible countries, providing $18.3 billion more in new loans than it received in repayments and $7.5 billion in grants.
Bilateral creditors, by contrast, scaled back lending after a wave of restructurings that wiped out up to 70% of long-term debt for some nations. In 2024, they collected $8.8 billion more in repayments than they disbursed.
As external options tightened, many governments leaned more heavily on domestic borrowing. Among 86 countries with available data, more than half saw domestic public debt rise faster than external debt.
“The rising tendency of many developing countries to tap domestic sources for their financing needs reflects an important policy accomplishment,” said Haishan Fu, the World Bank Group’s chief statistician and director of the Development Data Group. “But heavy domestic borrowing can spur banks to load up on government bonds when they should be lending to the private sector. Governments should be careful not to overdo it.”
The report warns that debt burdens are increasingly translating into real human costs, especially in the world’s poorest and most vulnerable states, where nearly two-thirds of people cannot afford a basic nutritious diet.
