Developing Countries’ External Debt Reaches 12.3 Trillion Dollars as Its Growth Slows
The external debt of developing countries reached 12.3 trillion dollars in 2025, up 508 billion dollars from a year earlier, according to a report of the UN Secretary-General listed by UN Trade and Development on 23 September. The pace of accumulation has slowed sharply: the average rate of external debt accumulation slowed to 2.1 percent between 2021 and 2025 from 7.2 percent between 2015 and 2021.
| Indicator | Figure |
|---|---|
| External debt of developing countries, 2025 | 12.3 trillion dollars |
| Increase on 2024 | 508 billion dollars |
| Total external debt service, 2025 | 1.6 trillion dollars |
| Rise in interest on long-term external debt, 2025 | Almost 14% |
| Domestic share of general government debt, 2024 | 81% |
UN Trade and Development, External debt sustainability and development (2026).
Lower debt service, higher interest
Total external debt service, principal and interest combined, fell to 1.6 trillion dollars in 2025, about 200 billion dollars below 2023. The report says the decline came mainly from lower principal repayments in a few large developing economies, while interest costs on long-term external debt rose by almost 14 percent. Least developed countries spent 18.2 percent of export earnings on external debt service in 2025. Inflows from non-residents funded 11 percent of gross capital formation in 2024, down from 20 percent in 2014.
Two measures of debt, two different questions
The report follows the Institute of International Finance’s Global Debt Monitor, which put global debt above 365 trillion dollars in the first half of 2026. The two figures measure different things and should not be read against each other. The institute’s total covers all borrowers, households, non-financial companies, governments and financial institutions, in both mature and emerging economies. The external debt figure of 12.3 trillion dollars covers only developing countries, and only the part of their debt owed to non-residents. The periods also differ: the end of 2025 for the external debt report, the first half of 2026 for the institute.
The institute’s total therefore takes in the debt of advanced economies and all domestic borrowing, neither of which enters the external measure. Within developing countries, domestic debt made up 81 percent of general government debt in 2024 and has cost an average of 2.8 percentage points more over the past decade, the report says. That domestic debt sits inside the institute’s global total but outside the external figure.
Why it matters: Slower external debt accumulation has not removed the financing squeeze: interest costs on long-term external debt still rose by almost 14 percent, and domestic borrowing, now the larger share of government debt, costs more on average, on our reading.
Outlook: Of 114.7 billion dollars in rechannelled special drawing rights pledged, 8 billion dollars, or 7 percent, had been disbursed by the end of March 2026, and disbursement of the rest is the next marker for cheaper development finance, on our reading.
Sources: UN Trade and Development, Institute of International Finance, Forbes.
