Developing countries’ debt climbed to a record $9.4 trillion in 2025, driven primarily by a sharp increase in private sector borrowing, according to the latest findings from the World Bank.
The surge in total debt is largely attributed to a nearly 35 per cent rise in borrowing from private creditors and the issuance of bonds by public enterprises. This shift towards commercial financing has heightened concerns regarding the fiscal stability of emerging economies across Africa, Asia, and Latin America.
The World Bank’s annual International Debt Report indicates that the reliance on private markets is creating a more volatile debt profile for many nations compared to previous years when multilateral lending was more prevalent.
Surge in private sector borrowing
The report highlights that the composition of debt in developing nations is changing. While multilateral debt—loans from organisations such as the International Monetary Fund (IMF) and the World Bank itself—often comes with concessional terms and longer grace periods, private debt is typically more expensive and carries higher interest rates.
The nearly 35 per cent jump in bond issuances by public enterprises suggests that even state-owned entities are increasingly tapping into commercial markets to fund their operations. While this provides immediate liquidity, it exposes these enterprises and, by extension, their host governments, to fluctuations in global interest rates and investor sentiment.
For many African nations, this trend presents a significant challenge to debt sustainability. As interest rates in advanced economies remain elevated to combat inflation, the cost of servicing dollar-denominated private debt has become a heavy burden on national budgets. This often results in a reduction of fiscal space for critical public spending in sectors such as healthcare, education, and infrastructure.
Economists note that the move toward private financing increases the risk of sudden capital outflows. Unlike multilateral lenders, who often engage in structured debt restructuring processes, private creditors can be more difficult to coordinate with during a financial crisis, potentially leading to protracted legal battles or default scenarios.
The $9.4 trillion figure represents a historic high for the developing world, marking a period of intense financial pressure. The combination of high debt volumes and the expensive nature of private credit means that many low-income countries are now spending a disproportionate amount of their revenue simply to service existing interest payments.
The World Bank’s report serves as a warning to policymakers regarding the need for more robust domestic resource mobilisation and more cautious approaches to commercial borrowing. As nations navigate the complexities of a high-interest-rate environment, the sustainability of this $9.4 trillion debt pile remains a central concern for international financial institutions.
Global credit rating agencies are expected to closely monitor the ability of these nations to meet their upcoming bond maturities as the implications of this record debt levels become clearer in the next fiscal quarter.
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