Developing-country debt climbs to $9.4 trillion as borrowing costs rise

Global shocks weigh more heavily on food security in indebted countries

Debt owed by developing countries rose to a record $9.4tn (£7tn) last year, according to the World Bank’s annual International Debt Report. The 5.5% increase was the fastest in four years, and the report attributed the faster growth to a rapid rise in private-sector lending.

The report said the rising cost of servicing external debt was preventing some governments from investing for the future. World Bank chief statistician Haishan Fu said: “Access to international finance has improved, but the price of that finance has not. Low- and middle-income countries are borrowing more, paying more, and, in many cases, leaving less for long-term development.”

Among the poorest countries, defined as those eligible for concessional lending from the World Bank, the average interest rate on new borrowing was 8.2%, the highest since the late 1980s. Preliminary data for 2026 suggested lending continued at a rapid pace, but at continued high interest rates as global financing costs rose.

The World Bank highlighted recent borrowing by Laos at an interest rate of 11.5%, the Republic of Congo at 13.88%, and Kenya at 9.2%.

The World Bank found that global shocks had more impact on the availability of food in heavily indebted countries. “Food and nutrition security provides a concrete example of these interactions, illustrating how debt burdens may be closely associated with a decline in the affordability of a healthy diet during periods of global stress,” the report said.

At the IMF-World Bank annual summit in Bangkok in October, demonstrators demanded debt relief for poorer countries.

The UK government is preparing to champion a “new drive on debt” as part of its G20 presidency next year. Prime Minister Andy Burnham linked the effort to confronting the legacy of slavery and appointed former Labour prime minister Gordon Brown to examine the feasibility of changes to the global debt regime in the run-up to the UK’s G20 presidency.

UK Foreign Secretary Ed Miliband set out plans last month for a “new deal” for heavily indebted countries in a speech at the IMF annual meetings in Bangkok. The deal was likely to include proposals to mobilize the balance sheets of the World Bank and other multilateral development banks to buy back outstanding debt, extend repayment periods and bring down interest rates.

The situation is more complex than it was in the run-up to the 2005 Gleneagles summit, when G8 countries signed up to write off billions of pounds worth of debt. Today’s creditors tend to be private-sector bondholders rather than governments.

Calls for changes to the international debt framework have grown in recent years, including among African Union heads of state and under the G20 chairs of Brazil and South Africa.