Developing Nations Lost $741Billion to Debt Outflows in Three Years — World Bank

Developing countries entered 2025 with one of the harshest debt and financing environments in half a century, as new World Bank data shows they paid out $741 billion more in principal and interest between 2022 and 2024 than they received in new external financing—the largest negative financing gap in at least 50 years.

The latest International Debt Report, paints a stark picture of tightening global financial conditions, constrained access to affordable capital and rising debt vulnerabilities across low- and middle-income economies.

Bond Markets Reopen, but at a Cost

Although interest rates peaked in 2024 and bond markets briefly reopened, allowing several countries to raise multi-billion-dollar issuances, the relief came with steep price tags. Bond investors funneled $80 billion in net new financing, but borrowing costs remained punishing, hovering around 10%—double pre-2020 levels.

Governments took advantage of the temporary window to restructure a historic $90 billion in external debt, the highest since 2010, helping many avoid outright default.

Yet, World Bank Chief Economist Indermit Gill cautioned against complacency:
“Global financial conditions might be improving, but developing countries should not deceive themselves: they are not out of danger.”

Debt Burden Hits New Records

By the end of 2024, the combined external debt of developing countries reached an unprecedented $8.9 trillion, including a record $1.2 trillion owed by 78 low-income economies eligible for IDA support.

Interest payments alone consumed $415 billion—funds that could have been directed to education, health, and infrastructure. The burden is especially evident in the lowest-income, highly indebted countries, where 56% of people cannot afford a minimum daily diet.

Interest rates on newly contracted public debt also soared:

• Official lenders charged the highest rates in 24 years,

• Private lenders charged the highest in 17 years.

Shift to Domestic Borrowing Raises Fresh Risks

As bilateral creditors pulled back—taking in $8.8 billion more than they disbursed—and concessional financing became harder to obtain, many governments turned inward.

More than half of the 86 countries with available data saw domestic debt rising faster than external debt as governments borrowed heavily from local banks.

While this shift reflects improving domestic capital markets, the World Bank warns it carries risks: heavy domestic borrowing often crowds out the private sector, pushes banks to overload on government securities and exposes governments to costly short-term refinancing cycles.

Multilateral Banks Remain the Lifeline

Amid shrinking options, multilateral development banks—chief among them the World Bank—emerged as the only major providers of affordable finance. In 2024 alone, the World Bank delivered:

• $18.3 billion more in new financing to IDA countries than it received back, and

• A record $7.5 billion in grants.

Human Cost of Debt Stress Growing

Beyond the macroeconomic concerns, the report highlights worsening human impacts. In the 22 most highly indebted countries, where external debt surpasses 200% of export revenue:

• 56% of the population cannot afford a minimum daily diet,

• In IDA countries, the figure climbs to nearly two-thirds.

Outlook: A Narrow Window for Reform

With debt service obligations rising and financing options narrowing, the World Bank urges policymakers to use the current “breathing room” to rebuild fiscal buffers and avoid rushing back into expensive debt markets.

Gill put it bluntly:
“Their debt build-up is continuing—sometimes in new and pernicious ways.”

For many developing countries, the next few years will determine whether they restore debt sustainability or slide deeper into financial distress.