In its Annual International Debt Report, the Washington-based lender also found that global interest payments had reached a record $415.4 billion in 2024, despite some relief from falling global interest rates.
“Global financial conditions may be improving, but developing countries should not fool themselves: they are not out of the woods,” World Bank chief economist Indermit Gill said in the report, adding that debt accumulation continues “sometimes in new and pernicious ways.”
Bond markets reopened for most countries at the end of a long global cycle of interest rate hikes, paving the way for billions of dollars in new issuance. But this came at a cost, as interest rates on bond debt approached 10% – roughly double what they were before 2020 – and low-cost financing options dwindled.
Emerging countries are also increasingly turning to national debt markets for financing. In 50 countries, domestic debt grew at a faster rate than external debt last year.
The bank said this was a sign of evolving local credit markets, but warned it could reduce local bank lending to the private sector and potentially increase the cost of refinancing due to shorter maturities.
Emerging markets restructured nearly $90 billion of foreign debt in 2024, a 14-year high, including operations in Ghana, Zambia, Sri Lanka, Ukraine and Ethiopia and debt forgiveness in Haiti and Somalia.
Meanwhile, net bilateral loan flows plummeted 76% to $4.5 billion, a level not seen since the 2008 financial crisis, forcing countries to seek more expensive private financing.
Although multilateral loans increased and the World Bank itself lent a record $36 billion, 54% of low-income countries are now in difficulty or face a high risk of debt.
“Policymakers around the world should make the most of today’s breathing space to get their fiscal affairs in order rather than rushing back into external debt markets,” Gill said.
