External debt held by developing nations reached a record $9.4 trillion in the past year, marking a 5.5% increase that represents the fastest growth in four years, according to the World Bank’s annual International Debt Report. The expansion was primarily fueled by a surge in private sector lending, placing additional financial strain on governments’ ability to invest in long-term development initiatives.
Low-income countries eligible for concessional lending from the World Bank faced an average interest rate of 8.2% on new borrowing, the highest level recorded since the late 1980s. Specific examples cited in the report included Laos borrowing at 11.5%, the Republic of Congo at 13.88%, and Kenya at 9.2%. Preliminary data for 2026 indicated lending continued at rapid levels while interest rates remained elevated due to global financing cost increases.
World Bank chief statistician Haishan Fu noted that while access to international finance has improved for developing countries, the cost of that financing has not decreased proportionally, resulting in governments borrowing more while having less available for development priorities. Research by the Bank demonstrated a correlation between high debt burdens and reduced food security in heavily indebted nations, showing how global economic shocks have greater impact on food affordability in countries facing significant debt obligations.
The UK government has positioned debt relief as a priority for its G20 presidency next year, with Prime Minister Andy Burnham directing former Prime Minister Gordon Brown to examine potential reforms to the global debt framework. Foreign Secretary Ed Miliband outlined proposals for a “new deal” focused on heavily indebted countries, potentially involving multilateral development banks purchasing outstanding debt to extend repayment periods and reduce interest rates. However, the challenge today differs from previous debt relief efforts, as creditors are increasingly private sector bondholders rather than government entities.
Article Attribution | Read More at Article Source
Article summary produced by Claude AI