ISLAMABAD: The World Bank today released its International Debt Report 2025, sharing shocking details about foreign debts and repayments by poor countries (low and middle-income nations) in 2024. According to report, the low and middle-income countries paid $741 billion more in 2024 as markup and principal amount. The interest payment alone consumed $415 billion in 2024.
The report revealed that the foreign debt repayments by the low-income countries set a new record of 50 years high in 2024 as the total repayments amounted to $8.9 trillion. The low and middle-income countries paid a record interest of $415 billion on foreign loans in 2024. The World Bank has revealed this shocking data in its annual report in International Debt Report 2025.
In 2024, the total external debt stock of low- and middle-income countries hit a new record: US$8.9 trillion, of which US$1.2 trillion—also a record—was owed by the 78 most vulnerable countries eligible to receive grants and low-cost loans from the World Bank’s International Development Association. It was the wrong time for this type of record-breaking: average interest rates for developing countries haven’t been higher since just before the great financial crisis of 2008–09. These countries paid a record US$415 billion in interest alone—money that might otherwise have been used to trim the rising ranks of out-of-school children, improve primary health care, and electrify rural villages.
A paradox is playing out in developing economies. On the bright side, inflation is abating. The oppressive interest rates of the last five years have begun to ease, which implies that the crushing debt service burdens of the last few years might start to shrink. For the right price, foreign bond investors are willing to provide financing again, enabling many countries to stave off default.
For most countries, however, these are small consolations—not enough to overcome the grave setbacks of this decade. As this report documents, the upheavals of the early 2020s produced a financial riptide like no other: between 2022 and 2024, about US$741 billion more flowed out of developing economies in debt repayments and interest than flowed into them in the form of new financing. It was the largest debt-related outflow in more than 50 years.
The human toll has been steep: among the 22 most highly indebted countries, one out of every two people today cannot afford the minimum daily diet necessary for lasting health. It’s imperative, therefore, for policy makers everywhere to make the most of the breathing room that exists today, because the luxury could vanish tomorrow. That means putting the debt burdens of developing countries back on a sustainable path—by putting the fiscal house in order and reducing sovereign risks in ways that spur productive investment. It means modernizing the global systems meant to avert debt distress—by sounding the alarm before countries stray off the path and by helping them restructure their debts swiftly once the crisis arrives.
Progress, of course, is occurring, but it is modest, and considerably more is needed. Debt burdens are now growing more slowly. Creditors were in a forgiving mood last year: they agreed to restructure US$90 billion in developing country debt, more than at any time since 2010. Ghana, Haiti, Somalia, and Sri Lanka, for example, secured restructuring agreements that shrank their long-term external debt by anywhere from 4 percent to 70 percent. Because of the work of the Global Sovereign Debt Roundtable, led by the International Monetary Fund and the World Bank, Ghana managed to complete its restructuring with its official bilateral creditors in half the time it took for previous restructurings under the Group of Twenty’s Common Framework for Debt Treatments.
Yet it’s no easier today for developing countries to stay clear of a debilitating debt trap than it was a decade ago. It would be foolish to expect that the human misery caused by the next debt crisis will be milder than the most recent one. That’s because the global machinery for tackling crises has not kept up with the times. It was designed for a time when developing economies owed most of their external debt to the World Bank, the International Monetary Fund, and a handful of high-income economies—all of which provided loans at below-market rates. That was a long time ago. Today, private creditors—bond investors mostly—account for nearly 60 percent of the long-term public and publicly guaranteed debt of developing economies.
