According to the World Bank’s International Debt Report 2026, external debt stock in developing countries climbed 5.5% to a record $9.4 trillion in 2025, as private creditors returned to emerging markets and bond issuance rebounded. The increase was the fastest since 2021 and roughly four times the 0.5% average annual growth recorded between 2022 and 2024. The Bank’s summary of the findings was blunt: access to international finance has improved, but the price of finance has not.
The International Debt Report (IDR) is a longstanding annual publication of the World Bank featuring external debt statistics and analysis for the low- and middle-income countries that report to the World Bank Debtor Reporting System (DRS). For five decades the IDR has helped shape policies in development finance by sharing timely and comprehensive external debt data and analysis with the international community. The newly published IDR 2026 provides an analysis of external debt stocks and flows as of end-2025, an assessment of debt dynamics and their policy implications, and an update on the debt transparency agenda.
For much of the past three years, developing economies faced a hostile environment. Global interest rates were high, and many governments found themselves paying creditors more than they were receiving in new money. That has begun to change. Bond issuance by public entities rose nearly 35% to $251 billion, its highest level in five years, bringing more countries back to international markets.
The recovery shows up in the flow figures. Long-term debt flows moved from a net outflow of $118 billion in 2024 to a net inflow of $45 billion in 2025. Even so, the damage from the lean years has not been undone. Developing countries paid $436 billion more in debt service than they received in new financing over the four years from 2022 through 2025.
The sharpest growth came among the world’s most vulnerable economies. External debt rose 8.1 per cent to $1.3 trillion in countries eligible for concessional financing from the World Bank Group’s International Development Association (IDA), the arm that serves the poorest nations. These countries also face the highest prices. IDA-eligible countries paid an average of 8.2% on new commitments from private creditors in 2025, the highest level since 1989, and 9.4% on new bonds. Better-off developing nations borrowed far more cheaply: countries eligible only for non-concessional lending paid an average of 5.5% on new bonds, down from 5.8% a year earlier.
The gap between what poor countries pay official lenders and what they pay private creditors has also grown. It widened to 5.5 percentage points, compared with 3.4 percentage points in 2016. In practical terms, the more a poor country leans on commercial markets, the more expensive its debt becomes. Early data for 2026 suggest governments are not deterred by the cost. More than 10 countries had exceeded their entire 2025 issuance by mid-August, and several others returned to the market. Analysts will watch whether that momentum survives if global rates stay elevated, since each new issue at 8% or 9% adds to the repayment calendar of the next decade.
The result is a steady drain on public budgets. Low- and middle-income countries spent $1.4 trillion on principal and interest payments in 2025, a 1.9% increase that marked the fifth consecutive annual rise. Payments to bondholders alone reached $363 billion, partly because buybacks and early repayments were funded with fresh issuance. The Bank warns that heavy repayments threaten to crowd out essential investments in education, infrastructure and health, the spending that ultimately determines whether poor countries can grow out of debt.
The report’s central message is that reopened markets are a relief but not a cure. Countries that can borrow at 5% or 6% are in a manageable position. Those paying 9% are borrowing against a future in which a growing share of tax revenue goes to creditors rather than citizens. For policymakers, the choices are uncomfortable. Cheaper concessional finance, better debt-management tools, and more transparent data on what is owed and to whom are all on the table. None offers a quick fix, and the Bank’s numbers suggest the burden is growing fastest where governments can least afford it.
The report also puts national debt in perspective. The report pointed to rising external debt vulnerabilities across the broader Middle East, North Africa, Afghanistan and Pakistan region, a reminder that the pressure is not confined to any one continent. The Middle East, North Africa, Afghanistan and Pakistan (Menap) region recorded improvements in debt-service and interest ratios. However, its external debt-to-gross national income (GNI) ratio rose from 26.7pc to 29.4pc in 2025, the largest single-year increase of any region, indicating continued debt accumulation.
The report noted that Pakistan’s external debt increased from $68.673bn in 2015 to $135.107bn in 2025. This included public and publicly guaranteed debt of $107.076bn, private non-guaranteed debt of $17.58bn and short-term debt of $10.45bn. Of the public and publicly guaranteed debt, $56.83bn was owed to multilateral creditors, $42.43bn to bilateral creditors and $7.8bn to private creditors. China was Pakistan’s largest individual creditor, with $22.4bn outstanding, followed by the World Bank with $19.2bn and the Asian Development Bank (ADB) with $16.83bn.
The report put the average maturity of loans from official creditors at 16 years, with a four-year grace period and an average interest rate of 3.6 per cent. On the other hand, private credit carried an average interest rate of 8.6pc, with a three-year repayment period and a one-year grace period. In 2025, China extended the maturities on $2bn in loans to Pakistan, while the International Monetary Fund (IMF) provided $2.3bn in new disbursements under the Extended Fund Facility and Resilience and Sustainability Facility arrangements to support the country’s long-term economic stability.