Debt Crisis Looms: 54% of Developing Countries at Risk, World Bank Warns

Quick overview

The organization revealed that the gap between what developing countries owed on their debts and the new financing available has hit a record high.

The World Bank warned that developing nations continue to face severe financial risks, despite a slight improvement in global funding conditions.

Its latest report shows that between 2022 and 2024, the gap between debt payments owed and new financing available reached $741 billion, the highest level in more than five decades. Interest payments alone hit a record $415.4 billion in 2024.

The report notes that although bond markets reopened after the drop in global rates, the relief has been limited: sovereign borrowing costs remained near 10%, almost twice pre-2020 levels.

World Bank flags growing global debt pressures

Against this backdrop, many countries increasingly turned to domestic borrowing. In 50 nations, domestic debt grew faster than external debt in 2024. While this shift shows some capacity for local financial development, it could also squeeze private-sector credit and create refinancing pressure due to shorter maturities.

Last year, about $90 billion in external debt was restructured—the highest in 14 years. Affected countries include Ghana, Zambia, Sri Lanka, Ukraine, and Ethiopia, while Haiti and Somalia received debt relief.

Meanwhile, bilateral financing (government-to-government lending) collapsed 76% to just $4.5 billion, its lowest level since the 2008 financial crisis. This drop forced many nations to seek private financing, which is costlier and comes with less favorable terms.

Although the World Bank provided a record $36 billion in lending as a multilateral institution, the situation remains critical: roughly 54% of low-income countries are now in debt distress or at very high risk of falling into it.

The institution warned: “Even as global financial conditions appear to be improving, developing countries should not be deceived—they are not out of danger.”

The message stresses the urgent need for nations to use any available fiscal space to stabilize their domestic finances, avoid rushing back into external debt markets, and focus on long-term sustainability.

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Ignacio Teson

Economist and Financial Analyst

Ignacio Teson is an Economist and Financial Analyst. He has more than 7 years of experience in emerging markets. He worked as an analyst and market operator at brokerage firms in Argentina and Spain.

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