A new report from the World Bank on Thursday revealed that developing countries paid $741 billion last year to cover principal and interest on their external debts—far exceeding the amount of new financing they received between 2022 and 2024. This gap is the largest in 50 years.
اضافة اعلان
Last year, most countries managed to stabilize their debt situations as interest rates peaked and bond markets reopened. This allowed many countries to avoid default risks by restructuring their debt.
Overall, developing countries restructured $90 billion in external debt in 2024, the largest amount since 2010, while bond investors provided $80 billion in new financing. However, this funding came at a high cost, with interest rates averaging around 10%, about double the pre-2020 levels.
Indermit Gill, Chief Economist at the World Bank and First Vice President for Development Economics, noted:
“Although global financial conditions may be improving, developing countries should not be complacent. Debt accumulation continues, sometimes in harmful new forms. Policymakers worldwide should use the current window to restore fiscal stability rather than rushing back to external debt markets.”
The report indicated that in 2024, the total external debt of low- and middle-income countries reached an all-time high of $8.9 trillion, including $1.2 trillion owed by 78 low-income countries eligible to borrow from the World Bank’s International Development Association (IDA).
The average interest rates these countries will pay on newly contracted public debts in 2024 were the highest in 24 years, and payments to private-sector creditors reached the highest level in 17 years. Overall, these countries paid $415 billion in interest alone, money that could have been spent on education, healthcare, and essential infrastructure. For example, half of the population in the most indebted countries cannot afford the minimum essential food for long-term health.
Obtaining low-cost financing is increasingly difficult, except through multilateral development banks, particularly the World Bank, which remains the largest provider of funding for IDA-eligible countries. In 2024, the World Bank provided a record $18.3 billion in new financing, exceeding debt service payments, including $7.5 billion in grants.
Bilateral official lenders, including governments and related institutions, have reduced their financing after debt restructurings that cut long-term external debt for some countries by up to 70%. In 2024, these institutions received $8.8 billion in principal and interest payments, more than the new financing they provided.
With limited access to low-cost funding, many developing countries turned to domestic financial sources, such as commercial banks and local financial institutions. Data from 86 countries show that more than half experienced faster growth in domestic government debt compared to external public debt.
Haishan Fu, Chief Statistician at the World Bank, emphasized that this trend reflects the development of local capital markets, but warned that overreliance on domestic borrowing could divert banks from funding the private sector. Domestic debt often has shorter maturities, raising refinancing costs, so governments must exercise caution.
The report also highlighted the human impact of high debt levels. Among 22 highly indebted countries—where external debt exceeds 200% of export revenues—about 56% of the population cannot afford minimum essential food. Of these, 18 countries are IDA-eligible, where two-thirds of people cannot afford basic nutrition.
