WASHINGTON — Developing countries paid out $741 billion more in external debt principal and interest than they received in new financing between 2022 and 2024, marking the largest net outflow in at least 50 years, the World Bank said in its latest International Debt Report on Wednesday.
Despite the historic outflow, many countries gained temporary relief last year as interest rates peaked and bond markets reopened. This allowed them to restructure $90 billion in external debt in 2024, the highest level since 2010. Bond investors also contributed $80 billion more in new financing than they received in repayments, enabling several multi-billion-dollar issuances, though at high borrowing costs, with interest rates averaging around 10% — roughly double pre-2020 levels.
“Global financial conditions might be improving, but developing countries should not deceive themselves: they are not out of danger,” said Indermit Gill, World Bank Group Chief Economist. “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.”
The report shows that the combined external debt of low- and middle-income countries reached $8.9 trillion in 2024, with the 78 mainly low-income countries eligible for World Bank International Development Association (IDA) financing accounting for a record $1.2 trillion. Average interest rates on newly contracted public debt hit a 24-year high with official creditors and a 17-year high with private creditors.
The countries paid a record $415 billion in interest alone — funds that could otherwise have supported schools, healthcare, and infrastructure. In the most heavily indebted countries, an estimated half of the population cannot afford a minimum daily diet necessary for long-term health.
Low-cost financing became harder to access, with the World Bank emerging as the largest provider for IDA-eligible countries. In 2024, it supplied $18.3 billion more in new financing than it received in repayments, along with $7.5 billion in grants. Official bilateral creditors, by contrast, provided less new funding than they collected, while many countries increasingly turned to domestic lenders. Of 86 countries with available data, more than half saw domestic debt grow faster than external debt.
“The rising tendency of many developing countries to tap domestic sources reflects an important policy accomplishment,” said Haishan Fu, World Bank Group Chief Statistician. “But heavy domestic borrowing can limit banks’ ability to lend to the private sector and carries shorter maturities, raising refinancing costs. Governments should be cautious.”
The report highlights the human cost of high debt. In the 22 most heavily indebted countries — where external debt exceeds 200% of export revenue — an average of 56% of the population cannot afford a basic diet. Among IDA-eligible countries, nearly two-thirds of people face the same challenge.
The World Bank urged countries to use the current window of relative stability to strengthen fiscal management and avoid unsustainable borrowing.
By John Smith
