Developing countries paid a record $1.4 trillion to service their debts last year, driven by high lending rates that pushed interest costs to a 20-year high, according to the World Bank. The poorest nations alone spent over $96 billion on debt servicing, with interest payments making up nearly $35 billion of that total.
The rising cost of foreign debt has led many countries to borrow more from institutions like the World Bank, further straining their finances. World Bank chief economist Indermit Gill stated that multilateral development banks are increasingly acting as lenders of last resort, a role they were not originally designed for.
The report highlights that high interest rates have significantly contributed to the growing debt burden, with official loan rates doubling to over 4%. Rates from private creditors have reached a 15-year high of 6%. Although interest rates have started to decrease in some advanced economies, the World Bank predicts they will remain above pre-pandemic levels.
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