Developing countries experienced a significant outflow of funds between 2022 and 2024, paying $741 billion more in principal and interest on their external debt than they received in new financing. This marks the largest such gap in at least five decades, according to the World Bank’s latest International Debt Report.
Despite these challenges, most developing nations found some relief last year as global interest rates peaked and bond markets reopened. Many countries managed to avoid default by restructuring their debt, with a total of $90 billion in external debt restructured in 2024—the highest amount since 2010. Bond investors contributed $80 billion more in new financing than they received back through repayments and interest, enabling several countries to complete large bond issuances. However, these funds came at a steep cost, with average interest rates around 10%, roughly double the rates seen before 2020.
“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 to put their fiscal houses in order—instead of rushing back into external debt markets.”
The report notes that by 2024, low- and middle-income countries’ combined external debt reached an unprecedented $8.9 trillion. Of this amount, $1.2 trillion was owed by the 78 mainly low-income countries eligible for support from the World Bank’s International Development Association (IDA). The average interest rate paid by developing economies on newly contracted public debt from official creditors reached its highest level in 24 years; rates paid to private creditors were at a 17-year high.
Interest payments alone totaled a record $415 billion—funds that could have been used for essential services such as education, healthcare, or infrastructure. In many highly indebted nations, one out of every two people could not afford the minimum daily diet required for long-term health.
Access to low-cost financing became increasingly limited except through multilateral development banks like the World Bank. In 2024, the World Bank was identified as the largest net provider of new financing for IDA-eligible countries, supplying $18.3 billion more than it received from them in repayments and interest payments. It also distributed a record $7.5 billion in grants to these nations.
Official bilateral creditors reduced their lending after participating in restructurings that lowered some countries’ long-term external debts by up to 70 percent. In contrast to previous years, bilateral creditors collected $8.8 billion more from developing nations than they disbursed as new loans or credits during 2024.
With fewer options for affordable international borrowing available, many developing countries turned inward for funding needs—relying on domestic commercial banks and financial institutions instead. Data shows that among 86 surveyed nations with available information on domestic debt levels, over half saw domestic government borrowing grow faster than foreign borrowing.
“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 its Development Data Group. “It shows their local capital markets are evolving. But heavy domestic borrowing can spur domestic banks to load up on government bonds when they should be lending to the local private sector. Domestic debt also comes with shorter maturities, which can raise the cost of refinancing. Governments should be careful not to overdo it.”
The report highlights how elevated debt burdens have impacted daily life across developing regions: Among the world’s 22 most highly indebted nations—where external debts exceed twice annual export revenues—an average of 56% of residents cannot afford basic nutrition needed for long-term health; nearly two-thirds face this challenge within IDA-eligible states.