Low- and middle-income countries paid out $741 billion more in principal and interest on external debt than they received in new financing between 2022 and 2024, the largest such shortfall in at least 50 years, according to the World Bank's International Debt Report 2025, released December 3, 2025 [SRC-01]. Combined external debt across these economies reached $8.9 trillion in 2024, an all-time high [SRC-01].
How Much Are Developing Countries Paying Now?
Combined external debt of low- and middle-income countries (LMICs) hit $8.9 trillion in 2024, though annual growth slowed to 1.1%, the softest pace in years [SRC-02]. Interest payments alone reached $415 billion in 2024, a record for the second consecutive year [SRC-01].
The stock figure captures what is owed; the flow figures show the strain of servicing it. LMICs' interest payments are now more than double the level of a decade earlier, according to the World Bank's data blog accompanying the report [SRC-02]. Net debt inflows — new financing minus repayments — rose to roughly $210 billion in 2024, up from the depressed levels of the prior two years but still well short of offsetting the three-year outflow total [SRC-02]. The gap matters because it is a net figure: every dollar developing-country treasuries send abroad in debt service is a dollar unavailable for health, education, or infrastructure spending at home, even before accounting for currency depreciation, which can raise the local-currency cost of dollar-denominated debt independent of the stated interest rate [SRC-01].
Why Are Debt-Service Costs Rising So Fast?
Borrowing costs, not just borrowing volumes, are driving the increase. Developing-country governments issuing bonds have paid interest rates averaging close to 10%, roughly double pre-2020 levels; the average rate on official-creditor debt stands at a 24-year high and on private-creditor debt at a 17-year high [SRC-01].
The analysis: rates locked in during the 2022–2023 monetary-tightening cycle keep feeding through the system as older, cheaper debt matures and is refinanced at today's rates. That mechanism holds debt-service costs elevated for years even if central banks in lender countries continue cutting rates, because the refinancing pipeline runs on a lag.
Who Holds This Debt — Banks, Bonds, Or Governments?
The report's Chapter 1 data breaks out public and publicly guaranteed (PPG) external debt by creditor type for 2024, published by the World Bank [SRC-03]:
| Creditor type | Outstanding stock (2024) | 2024 change / share |
|---|---|---|
| Multilateral institutions (World Bank, IMF, others) | $1.4 trillion | +3.0% year over year |
| — of which World Bank | $463.1 billion | 34.1% of multilateral debt |
| — of which IMF | $371.6 billion | 27.3% of multilateral debt |
| Official bilateral creditors (government-to-government) | $475.2 billion | -3.6%; share down to 12.1% over the decade |
| Private creditors (bonds, banks, other) | $4.7 trillion | 72% of long-term PPG debt stock |
| — of which bondholders | $1.6 trillion | +1.6%; 41.6% share of PPG debt over the decade |
Private creditors — bondholders and commercial banks — now hold the large majority of long-term public debt owed by developing economies, a structural shift from the bilateral- and multilateral-dominated lending patterns of prior decades [SRC-03].
What Role Does China Play In Developing-Country Debt?
China is widely described as a major bilateral lender to developing economies. The IDR 2025 data show a second, less-discussed position: China is itself the largest single LMIC borrower in the dataset, accounting for 30.1% of all LMICs' interest payments and 71% of East Asia and Pacific region external debt [SRC-03].
The analysis: China's dual position — a creditor to smaller developing economies while simultaneously the top debtor among all low- and middle-income countries in aggregate statistics — complicates any single narrative about its balance-sheet exposure to the developing world. Which side of the ledger dominates depends on whether a given dataset is measuring China's outbound lending to specific countries or its own debt stock counted inside the LMIC aggregate.
What Happens To The Poorest Borrowers?
The 78 countries eligible for concessional financing from the International Development Association (IDA) — the World Bank's low-income lending arm — reported combined external debt of $1.2 trillion in 2024, also a record [SRC-01]. IDA eligibility is set by a per-capita income threshold, updated annually to $1,365 in gross national income for fiscal year 2027, alongside a creditworthiness test for some "blend" countries [SRC-04].
Support to this group also hit records: the World Bank provided $18.3 billion in net new financing to IDA-eligible countries in 2024 plus $7.5 billion in grants, both record levels [SRC-01].
Is There Any Debt Relief In Sight?
Developing countries restructured $90 billion in external debt in 2024, and the World Bank's own net flows to LMICs reached a record of about $36 billion [SRC-01] [SRC-02].
The analysis: those figures represent meaningful support at the margin but remain far smaller than the $741 billion cumulative outflow gap recorded over the prior three years. Current relief measures are offsetting part of the increase in service costs rather than reversing the underlying trend of the poorest borrowers paying out more than they take in.
How Does This Compare With Past Debt Episodes?
The World Bank frames the 2022–2024 outflow as the largest in roughly 50 years of comparable external-debt record-keeping [SRC-01]. Over the past decade, the creditor landscape itself has shifted: official bilateral lenders' share of outstanding debt fell to 12.1%, while bondholders' share rose to 41.6% of total PPG debt, according to the report's Chapter 1 data [SRC-03].
The analysis: a more dispersed creditor base — split between multilateral institutions, bilateral governments, bondholders, and commercial banks, per the Chapter 1 breakdown above — can complicate coordinated restructuring, since no single class of creditor holds enough of the debt to anchor a deal on its own the way concentrated bank lending did in earlier debt episodes.
FAQ
What is the International Debt Report?
It is the World Bank's annual compilation of external-debt statistics for low- and middle-income countries, drawn from the International Debt Statistics database. The 2025 edition covers debt stocks and flows through end-2024 [SRC-01].
What counts as a low-income country in this data?
Countries eligible for financing from the International Development Association, currently 78 nations, based on a per-capita gross national income threshold set at $1,365 for fiscal year 2027 [SRC-04].
Is China a creditor or a debtor in this dataset?
Both. China lends bilaterally to other developing economies, and separately carries the single largest share of LMIC debt-service obligations recorded in the report — 30.1% of total interest payments among all low- and middle-income countries [SRC-03].
How does bilateral lending compare with private lending?
Outstanding official bilateral (government-to-government) debt stood at $475.2 billion in 2024, down 3.6% from the prior year, while private creditors held $4.7 trillion, 72% of long-term public and publicly guaranteed debt stock [SRC-03].
For a related economy news perspective, read A Unique Platform for Independent Writers.
For more context, read How the buyer's premium works at Christie's and Sotheby's.