Developing countries' external debt has climbed to a record $9.4 trillion in 2025, growing at its fastest pace since the COVID-19 pandemic, the World Bank said on Thursday. According to the bank, the surge was driven mainly by private financing, a category of borrowing that typically carries steeper costs and tighter repayment terms than loans from governments or multilateral institutions. The figures, reported from Kathmandu, highlight the mounting financial pressure on low- and middle-income economies as they manage an ever-larger stock of obligations owed to foreign creditors.

A Record Stock, and a Faster Pace

The World Bank's announcement marked the latest milestone in a borrowing cycle that has accelerated sharply since the pandemic years, when governments across the developing world ramped up external borrowing to fund health responses and cushion their economies. The bank said the stock of external debt held by developing countries rose at its quickest rate since that period, pushing the total to an unprecedented $9.4 trillion.

Key facts at a glance

  • Total external debt of developing countries: a record $9.4 trillion in 2025
  • Pace of growth: the fastest since the pandemic
  • Main driver: private financing
  • Source of the announcement: the World Bank, on Thursday

While the headline number draws attention, the composition of the debt is just as significant. The World Bank attributed the increase mainly to private financing, meaning borrowing from banks, bondholders and other market-based sources rather than from official lenders such as foreign governments or development institutions. That distinction matters, because the two forms of credit come with very different terms and very different risks.

Why the Private Financing Shift Matters

Private creditors generally lend at market interest rates, which move with global financial conditions and investor sentiment. Unlike concessional loans from official sources, which often carry long maturities and below-market pricing, private borrowing typically offers less flexibility when repayment becomes difficult. For indebted governments and firms, that can translate into heavier debt-service bills and less room to absorb economic shocks.

A growing share of private financing is a double-edged signal. On one hand, it suggests that developing-country borrowers retain access to international capital markets and that investors remain willing to lend to them. On the other, it leaves borrowers more exposed to shifts in global interest rates and to sudden changes in risk appetite, when capital that flowed in readily can just as quickly retreat. The World Bank's finding that private financing powered the latest increase therefore sits at the center of debates about debt sustainability in the developing world.

The speed of the rise is also notable. Growth in external debt at the fastest pace since the pandemic suggests that borrowing needs have intensified rather than eased in the years since the global health crisis, even as many developing economies have struggled with slower growth, tighter global financial conditions and the lingering effects of recent inflation.

The Weight of External Debt

External debt refers to what a country's government, businesses and households owe to creditors abroad, and it is usually denominated in foreign currencies such as the US dollar or the euro. That currency mismatch is a core vulnerability: when a developing country's own currency weakens, the local-currency cost of servicing foreign-currency debt rises, even if the underlying loan balance has not changed.

For governments, a large external debt stock can crowd out other priorities. Revenue that goes toward interest payments and repayments is revenue that cannot be spent on health, education, infrastructure or climate resilience. In the most stretched cases, countries can find themselves choosing between honoring obligations to creditors and meeting basic needs at home, a dilemma that has repeatedly surfaced in debt-stressed economies in recent years.

The record $9.4 trillion total covers an enormous and diverse group of economies, from large emerging markets that borrow extensively in international bond markets to smaller low-income countries with far more limited access to financing. The burden is not evenly spread, and the pressure points tend to emerge where borrowing has been rapid, the creditor base is heavily private, and export earnings or remittances are volatile.

From Kathmandu, A Global Warning

The figures were reported from Kathmandu, where the news carries particular resonance. Nepal and its neighbors sit squarely within the group of developing economies whose external borrowing the World Bank tracks, and the bank's warning about the fastest debt growth since the pandemic lands in a region where governments are balancing development ambitions against rising financing needs.

For policymakers across the developing world, the record underscores a familiar set of challenges: managing exchange-rate risk, extending maturities, keeping debt-service costs contained and preserving access to affordable financing. The World Bank's emphasis on private financing as the main engine of the increase will likely feed ongoing discussions about how borrowers can tap international markets without stacking up vulnerabilities for the future.

For now, the bank's Thursday announcement leaves the headline picture unambiguous. Developing countries are carrying more external debt than ever before, and the pace at which that debt is growing has returned to levels not seen since the pandemic. Whether the trajectory bends will depend on global interest rates, the appetite of private investors and the ability of borrowing governments to convert debt into productive investment rather than accumulating obligations. Further details are available via RatoPati and RatoPati English.