Developing country debt hits record $9.4tn as poorest face highest rates since late 1980s
World Bank data shows a 5.5% rise in external debt last year, with the poorest nations paying an average 8.2% interest on new borrowing.
At a glance
- Developing country debt rose 5.5% to a record $9.4tn last year, the fastest increase in four years, World Bank data shows.
- The poorest countries paid an average 8.2% interest on new borrowing, the highest rate since the late 1980s.
- The UK plans a G20 'new drive on debt' and has appointed Gordon Brown to study changes to the global debt regime.
Debt owed by developing countries climbed to a record $9.4tn (£7tn) last year, with the poorest nations paying the highest interest rates since the late 1980s, according to World Bank data.
The bank's annual International Debt Report found the rising cost of servicing external debt was preventing some governments from investing for the future. The 5.5% increase in developing-country debt was the fastest in four years and was driven by a rapid rise in private-sector lending.
Borrowing more, paying more
Haishan Fu, the World Bank's chief statistician, said: "Access to international finance has improved, but the price of that finance has not. Low- and middle-income countries are borrowing more, paying more, and, in many cases, leaving less for long-term development."
Countries eligible for concessional lending from the World Bank faced an average interest rate of 8.2% on new borrowing — the highest since the late 1980s. Preliminary data for 2026 suggested lending continued at a rapid pace, but at continued high interest rates as global financing costs rose.
The report highlighted recent borrowing by Laos at an interest rate of 11.5%, the Republic of Congo at 13.88% and Kenya at 9.2%.
Food security and debt
Analysing the connection between high debt burdens and the ability to spend on domestic priorities, the World Bank found global shocks had more impact on the availability of food in heavily indebted countries.
"Food and nutrition security provides a concrete example of these interactions, illustrating how debt burdens may be closely associated with a decline in the affordability of a healthy diet during periods of global stress," the report said.
UK plans a 'new drive on debt'
The UK government is preparing to champion a "new drive on debt" as part of its presidency of the G20 next year, a move the prime minister, Andy Burnham, has linked to confronting the legacy of slavery. Burnham has appointed the former Labour prime minister Gordon Brown to examine the feasibility of changes to the global debt regime in the run-up to the presidency.
The foreign secretary, Ed Miliband, set out plans last month for a "new deal" for heavily indebted countries in a speech at the IMF annual meetings in Bangkok. The proposals are likely to include mobilising the balance sheets of the World Bank and other multilateral development banks to buy back outstanding debt, extending repayment periods and bringing down interest rates.
The situation is more complex than in the run-up to the Gleneagles summit in 2005, when G8 countries signed up to write off billions of pounds of debt, because today's creditors tend to be private-sector bondholders rather than governments. Demands for changes to the framework for international debt have grown in recent years, including from African Union heads of state and under the G20 chairs of Brazil and South Africa.
Source: The Guardian Business.
Questions and answers
- How much debt do developing countries owe?
- Developing countries owed a record $9.4tn (£7tn) last year, a 5.5% increase that was the fastest rise in four years, according to the World Bank's International Debt Report.
- Why are the poorest countries paying more to borrow?
- The World Bank says countries eligible for concessional lending faced an average 8.2% interest rate on new borrowing, the highest since the late 1980s, and preliminary 2026 data suggested rates stayed high as global financing costs rose.
- What is the UK doing about developing country debt?
- The UK is preparing a "new drive on debt" for its G20 presidency next year. The prime minister, Andy Burnham, has appointed Gordon Brown to examine changes to the global debt regime, and the foreign secretary, Ed Miliband, has proposed a "new deal".
