Debt of poorest countries at record $9.4tn high, World Bank data shows

Cost of servicing external debt is preventing developing countries from investing for future

Debt owed by developing countries rose to a record $9.4tn (£7tn) last year, with the poorest paying the highest interest rates since the late 1980s, World Bank data shows.

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.

In its annual International Debt Report, the World Bank said the rising cost of servicing external debt was preventing some governments from investing for the future.

The increase in developing country debt last year, of 5.5%, was the fastest in four years, the report finds – driven by a rapid rise in private sector lending.

The World Bank’s chief statistician, Haishan Fu, said: “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.”

On average, the report found the poorest countries – 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. It also said preliminary data for 2026 suggested lending continued at a rapid pace – but at continued high interest rates as global financing costs rose.

The Bank highlighted recent borrowing by Laos, at an interest rate of 11.5%, the Republic of Congo, at 13.88%, and Kenya, at 9.2%.

Analysing the connection between a high debt burden and the ability to spend on domestic priorities, the World Bank found global shocks had more impact on the availability of food in heavily indebted countries.

“Food and nutrition security provides a concrete example of these interactions, illustrating how debt burdens may be closely associated with a decline in the affordability of a healthy diet during periods of global stress,” the report said.

Burnham has appointed the former Labour prime minister Gordon Brown to examine the feasibility of changes to the global debt regime in the run-up to the UK’s G20 presidency next year.

The UK foreign secretary, Ed Miliband, set out plans last month for a “new deal” for heavily indebted countries in a speech at the IMF annual meetings in Bangkok. The deal is likely to include proposals to mobilise the balance sheets of the World Bank and other multilateral development banks to buy back outstanding debt in an effort to extend repayment periods and bring down interest rates.

However, the situation is more complex than in the run-up to the Gleneagles summit in 2005 – when G8 countries signed up to write off billions of pounds worth of debt – because today’s creditors tend to be private-sector bondholders, not governments.

There have been growing demands in recent years for changes to the framework for international debt, including from African Union heads of state, and under the G20 chairs of Brazil and South Africa.