Developing countries spend record $1.4 trillion on debt servicing in 2023 – World Bank  

Interest payments alone reached $406 billion, a nearly 30% increase from the previous year, severely impacting spending in critical sectors such as health, education, and environmental programs.

According to the report, the most vulnerable economies, those eligible for loans from the World Bank’s International Development Association (IDA), bore the brunt of the financial strain.

These countries paid a record $96.2 billion to service their debts in 2023.

While principal repayments fell by 8% to $61.6 billion, the report shows that interest payments rose to an all-time high of $34.6 billion—four times the amount from a decade ago.

As credit conditions tightened, multilateral institutions like the World Bank became critical financial lifelines for low-income economies.

“Multilateral development banks are now acting as lenders of last resort for highly indebted poor countries, a role they were not designed to serve,” said Indermit Gill, Chief Economist and Senior Vice President of the World Bank Group.

The World Bank said the COVID-19 pandemic significantly increased the debt burdens of developing nations, a situation exacerbated by soaring global interest rates.

At the end of 2023, total external debt for all low- and middle-income countries rose to $8.8 trillion, an 8% increase since 2020. For IDA-eligible economies, total external debt jumped nearly 18% to $1.1 trillion.

“In 2023, borrowing abroad became considerably more expensive for all developing economies. Interest rates on loans from official creditors doubled to more than 4%. Rates charged by private creditors climbed by more than a point to 6%—a 15-year high.  

“Global interest rates have since begun to subside, although they are expected to remain above the average that prevailed in the decade before COVID-19,” the Bank stated in the report.