Developing nations are concluding 2025 under significant financial pressure, having disbursed $741 billion more in external debt service from 2022 to 2024 than they acquired in new financing — a shift that is exacerbating economic vulnerability and diminishing fiscal capacity across emerging markets.
The extent of the deficit is outlined in the World Bank’s most recent International Debt Report, published in December, which cautions that low- and middle-income economies are currently experiencing their most acute financing challenges in decades as increasing interest rates and reduced access to credit tighten the financial landscape.
The report emphasizes escalating fiscal distress, with interest payments alone surging to $415 billion, redirecting funds away from health, education, infrastructure, and other vital services.
External debt levels have reached an unprecedented $8.9 trillion, which includes $1.2 trillion owed by 78 low-income nations eligible for IDA assistance.
Despite global interest rates peaking in 2024 and international bond markets momentarily reopening, the relief came at a high cost. Investors contributed $80 billion in net new financing, but at average yields of approximately 10%, significantly higher than pre-2020 rates.
Concurrently, nations executed $90 billion in debt restructurings — the highest level since 2010 — in an effort to prevent default.
The human consequences are deteriorating: in the 22 most indebted countries, 56% of individuals are unable to afford the minimum daily diet necessary for healthy living, highlighting the social impact of escalating debt and tightening global financial conditions.
