Developing Economies Face Record Debt Outflows – World Bank

By Praisebell Rosemond Larbi

Developing countries paid more in debt service than they received in new financing for the third consecutive year in 2025, underscoring deepening financial pressures across low- and middle-income economies, according to the World Bank’s 2025 Year in Review. The Bank noted that debt outflows over the 2022–2024 period reached a 50-year high, highlighting the scale and persistence of the challenge confronting many emerging and developing economies.

The report explains that rising debt service costs, driven largely by higher global interest rates in recent years and currency pressures, have constrained fiscal space, limiting governments’ ability to invest in growth, social services, and development priorities. As a result, many countries have been forced to prioritise debt repayments over new spending, even as financing needs continue to grow.

Despite these headwinds, the World Bank observed that the global economy performed better than many analysts had expected, particularly in developing regions. Global growth exceeded earlier forecasts, even in the face of tariffs, trade tensions, and geopolitical uncertainty. The Bank noted that the reopening of bond markets and the gradual easing of interest rates provided some relief, while declining trade-policy uncertainty and relatively stable energy markets helped support economic activity.

“Forecasters now anticipate growth of about 2.7 per cent for this year, generally in line with expectations at the start of 2025,” the report stated. It added that this resilience was driven by rapid adaptation, including shifts in global supply chains, faster adoption of digital technologies such as artificial intelligence, and greater market diversification.

Against this backdrop, the World Bank Group said it intensified efforts to support countries in building resilience and expanding opportunity, with a strong emphasis on job creation. “This was our year of job creation, as we placed it at the centre of our development efforts,” the Bank said, stressing that jobs remain the most reliable pathway out of poverty. According to the report, employment not only provides income but also dignity, stability, and hope, while helping economies become more self-sufficient and reducing humanitarian pressures.

The World Bank also warned of major demographic shifts ahead. Over the next decade, about 1.2 billion young people in developing countries are expected to reach working age, a transition that will significantly shape the global economy. The Bank noted that if sufficient jobs are created, this demographic dividend could drive growth worldwide. However, failure to generate adequate employment opportunities could fuel instability, social unrest, and increased migration, with far-reaching consequences for both developing and advanced economies.