Developing countries paid out US$741 billion more in principal and interest on their external debt than they received in new financing between 2022 and 2024, the largest gap in at least 50 years, according to the World Bank’s latest International Debt Report released today.
According to the bank, most countries gained some breathing room on their debt last year as interest rates peaked and bond markets opened up again. That enabled many countries to stave off the risk of default by restructuring their debt.
In all, developing countries restructured US$90 billion in external debt in 2024, more than any time since 2010. Bond investors, meanwhile, pumped in US$80 billion more in new financing than they received in principal repayments and interest. This helped several complete multi-billion-dollar bond issuances.
However, the funds came at a high price interest rate hovered around 10%, about double those 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.”
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In 2024, the combined external debt of low- and middle-income countries hit an all-time high of US$8.9 trillion with a record US$1.2 trillion owed by the 78 mainly low-income countries eligible to borrow from the World Bank’s International Development Association (IDA), the new report shows. The average interest rate that developing economies will pay to their official creditors on their newly contracted public debt in 2024 stood at a 24-year high.
The average paid to private creditors was at a 17-year high. In all, these nations paid a record US$415 billion in interest alone resources that could have gone to schooling, primary healthcare, and essential infrastructure.
