Poorest Countries' Debt Hits Record $9.4 Trillion, World Bank Data 2026

Debt owed by developing countries rose to a record $9.4 trillion last year, with the poorest nations paying the highest interest rates since the late 1980s, according to new World Bank data. The 5.5% increase in developing country debt was the fastest in four years, driven by a rapid rise in private sector lending.

The World Bank's annual International Debt Report highlights that the rising cost of servicing external debt is preventing some governments from investing in their future. The UK government is preparing to champion a “new drive on debt” as part of its presidency of the G20 next year – a move the prime minister, Andy Burnham, has linked to confronting the legacy of slavery.

Why the Record Debt Matters

The surge in debt is not just a number – it has real consequences for billions of people. As the World Bank's chief statistician, Haishan Fu, noted: “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.”

This means less money for infrastructure, healthcare, education, and climate resilience. For the poorest countries, the burden is especially heavy: those eligible for concessional lending from the World Bank faced an average interest rate of 8.2% on new borrowing – the highest since the late 1980s.

Preliminary data for 2026 suggests lending continued at a rapid pace, but at continued high interest rates as global financing costs rose. The Bank highlighted recent borrowing by Laos as an example of the high rates being charged.

Who Is Affected Most

The poorest countries are hit hardest. These are nations that rely on concessional financing but are now facing market-like interest rates. The high cost of borrowing means that a larger share of their budgets goes to debt service rather than development.

Middle-income countries are also feeling the pinch. Many borrowed heavily when interest rates were low, and now face higher repayments as global rates rise. The rapid increase in private sector lending adds another layer of complexity, as private creditors often charge higher rates and are harder to restructure in times of crisis.

The UK's G20 Debt Drive

The UK government's plan to champion a “new drive on debt” during its G20 presidency next year signals a growing recognition of the problem. Prime Minister Andy Burnham has linked this initiative to confronting the legacy of slavery, suggesting a broader moral and historical dimension to the debt debate.

This could lead to renewed calls for debt relief, restructuring, or innovative financing mechanisms. However, with private creditors now holding a larger share of developing country debt, any solution will need to involve them as well. The background to this story is set out in Ed Miliband: Global Financial System Fails Developing Countries. A related thread runs through Student Debt Crisis: Government Piling Costs on Future Graduates. Earlier coverage in UK Aid Cuts Hit Poorest Countries Hardest Under Starmer shows how the argument developed.

What to Watch Next

Several key developments will shape the debt landscape in the coming months. First, the UK's G20 agenda will set the tone for international discussions on debt relief and restructuring. Second, the World Bank's preliminary 2026 data suggests that high borrowing costs are here to stay, at least in the near term. A closer look at the same subject appears in Banks Are Selling Data Center Debt Alongside Pension Plans: The 2008 Crisis. Anyone following the wider picture can start with US Credit Card Debt Hits $1.26 Trillion, Near Record High. The same theme surfaces in World Bank: Small AI Could Transform Developing Countries, which takes a different angle.

Third, the growing role of private creditors means that traditional debt relief frameworks, which focused on official creditors, may need to be updated. Finally, the link between debt and development will remain a central issue, as countries struggle to balance debt service with investments in sustainable development. Context on how this played out before sits in US Debt Crisis Looms as Trump Intervenes in Bond Markets. A companion piece, The High Cost of University Education: Student Debt Crisis, approaches the same subject from another angle.

Key Takeaways

• Developing countries' debt reached a record $9.4 trillion in 2023, up 5.5% from the previous year.
• The poorest countries are paying an average interest rate of 8.2% on new borrowing, the highest since the late 1980s.
• High debt service costs are crowding out investments in long-term development.
• The UK plans to push a “new drive on debt” during its G20 presidency next year.
• Private sector lending is driving the debt increase, complicating relief efforts.

Debt Comparison: Poorest vs. Other Developing Countries

FAQ

As the debt crisis deepens, it is essential to understand the broader economic and social implications. The UK's aid cuts have already hit the poorest countries hardest, exacerbating the challenges they face. Meanwhile, innovative solutions like small-scale AI are being explored to transform developing economies. For a deeper look at how UK aid cuts hit poorest countries hardest under Starmer, see our analysis. Additionally, the World Bank's report on small AI could transform developing countries offers a glimpse of hope. These issues are interconnected, and addressing them requires a comprehensive approach. To learn more about the World Bank's small AI could transform developing countries, read our article.