The World Bank has reported that the gap between principal and interest payments on external debt and newly received financing in developing countries reached $741 billion during 2022–2024, marking the highest level in 50 years. This information comes from the World Bank’s International Debt Report.
EXTERNAL DEBT HITS ALL-TIME HIGH
According to the report, total external debt of low- and middle-income countries is projected to reach $8.9 trillion in 2024, the highest level ever recorded. Among 78 low-income countries eligible for the International Development Association (IDA) funding, external debt hit a record $1.2 trillion.
DEVELOPING COUNTRIES’ DEBT PERFORMANCE
From 2022 to 2024, developing countries paid $741 billion more in debt principal and interest than they received in new financing, the largest gap in 50 years.
In 2024, the average interest rate for new public debt contracts with official creditors reached a 24-year high, while the rate for private creditors hit a 17-year high.
RECORD INTEREST PAYMENTS
These countries spent a record $415 billion solely on interest payments. IDA-eligible countries received $18.3 billion more in new financing than their principal and interest obligations, along with a record $7.5 billion in grants.
Bilateral official creditors, mostly governments or government-affiliated institutions, participated in debt restructuring processes that reduced some countries’ long-term external debt by up to 70%, and subsequently withdrew. Last year, these bilateral creditors collected $8.8 billion more in principal and interest than they provided in new financing.
As low-cost financing options declined, many developing countries turned to domestic creditors such as local commercial banks and financial institutions. Data from 86 countries shows that in over half, domestic public debt increased faster than external debt.
$90 BILLION IN EXTERNAL DEBT RESTRUCTURED
Developing countries restructured $90 billion of external debt in 2024, the highest amount since 2010. Bond investors provided $80 billion more in new financing than they collected in principal and interest, supporting the completion of billions in bond issuances.
Source: Patronlar Dünyası/ Prepared by: İlayda Gök