Developing economies need financing to build roads, power grids and schools, to create jobs, and to raise living standards. That is why access to capital has been a central goal of development finance for decades. But does access alone deliver these results?
The newly launched International Debt Report (IDR) 2026, the World Bank Group’s annual publication on external debt, puts this question front and center. Here is the paradox it reveals: access to international finance has improved, but the price of that finance has not. Low- and middle-income countries (LMICs) are borrowing more, paying more, and, in many cases, leaving less for long-term development.
External debt in LMICs rose to a record $9.4 trillion, marking the strongest increase in five years. Growth was even faster in IDA-eligible and low-income countries. For several years, private lending to LMICs was either declining or barely growing. In 2025, that trend reversed. Private lenders returned, and bond markets reopened after years of tight financial conditions and investor caution. On the surface, these developments point to a recovery. But beneath the headline numbers, the picture is more complicated.
Total debt service for LMICs rose for a fifth consecutive year in 2025, to $1.4 trillion, while payments to bondholders reached $363.1 billion. Between 2022 and 2025, LMICs paid about $436.1 billion more in principal and interest than they received in new financing. That means more public resources are being absorbed by debt servicing just when countries need to invest more in infrastructure, jobs, education, health, and the other foundations of long-term growth.
