Developing-world debt hits record USD 9.4 tn as private lenders return, at a price

External debt in low- and middle-income countries (LMICs) climbed 5.5% y-o-y to a record USD 9.4 tn in 2025, according to the World Bank’s International Debt Report 2026 (pdf). This is the fastest pace since 2021 and more than four times the 2022-2024 average. It came as capital markets reopened (at a price), the USD weakened against other currencies, and private investors were willing to lend.

A weaker USD flattered the headline: Currency valuation effects accounted for 28.2% of the rise in public and publicly-backed debt, the report says. The real driver was private money. Debt owed to private creditors rose by 5.2% in 2025, reaching USD 5 tn, which is a huge leap from the 0.6% rate recorded a year earlier. The reopening of bond markets came at a price too. Bond issuance by LMIC public-sector borrowers rose 34.6% to USD 250.6 bn, or 68.1% of new disbursements.

The poorest borrowers are paying the most: Countries eligible for International Development Association (IDA) saw their external debt rise 8.1% to USD 1.3 tn and paid an average 8.2% on new commitments, the highest since the late 1980s. The interest rate gap between what these borrowers pay to private lenders and what they pay official creditors widened to 5.5 percentage points from 3.4 points in 2016.

Money is flowing back in, but debt service is still rising: LMICs’ total debt service rose 1.9% to USD 1.4 tn in 2025, a fifth straight annual increase, with payments to bondholders up 13.7% to USD 363.1 bn. Although the 2022-2025 period saw LMICs pay out roughly USD 436.1 bn more than they received, net long-term flows swung to a USD 45.4 bn inflow after a USD 118.4 bn outflow in 2024.

Market access has not faded in 2026: Several countries — including India, Indonesia, Angola, and the Philippines — had already passed their full-year 2025 volumes by August 2026, even as the Middle East conflict that began in late February raised inflation and borrowing costs across emerging markets, the IMF says, as well as commodity prices.

In our region, debt is growing faster than income: External debt in the Middle East, North Africa, Afghanistan, and Pakistan grew 5.8% to USD 598 bn at end-2025, and the region’s debt-to-gross national income (GNI) ratio rose to 29.4% from 26.7% — the biggest one-year jump of any LMIC region — even as debt service eased to 3.1% of GNI. Relative to income, Sub-Saharan Africa carries one of the heaviest burdens: external debt there equals 48% of GNI, up from 34.4% in 2015.

The bank puts Egypt’s external debt at USD 164.3 bn at end-2025, up 5.3% y-o-y and equal to 47% of GNI. Private creditors hold some USD 51.2 bn of the USD 127 bn public and publicly-backed portion (c. 40%), against USD 41.9 bn owed to multilaterals, USD 33.8 bn to bilateral lenders, and a further USD 34.4 bn in short-term debt. Egypt also ranked among the largest IMF recipients of all LMICs in 2025, the report notes. New private commitments came at an average of 7.8% against 5.1% from official creditors.

REMEMBER- The Central Bank of Egypt’s (CBE) own external position report put total external debt at USD 161.2 bn at end-FY 2024/25 (stock-to-GDP 44.2%), and a later CBE print put it at USD 166.7 bn at end-June 2026 (pdf).

No GCC state is covered by the report, and Saudi Arabia appears in Egypt’s numbers only as a creditor — owed USD 6.4 bn, behind Russia’s USD 7.1 bn.

Why it matters: The money that is coming back is the money that can leave. Private lending “expands in favorable global conditions and contracts sharply when conditions tighten,” the report says, while official lending is “highly countercyclical” by comparison. That is the exposure in Egypt’s mix: the steadier money comes from official lenders, and the market that reopened is the more expensive half.

MARKETS THIS MORNING-

Asian markets broadly gained ground earlier today. South Korea’s Kospi rose 3.5% and Japan’s Nikkei surged 2.6%, spurred by Wall Street’s gains, tech sector momentum, and easing crude prices. MSCI Asia Pacific closed 2% higher, even as US stock futures held steady.

THE CLOSING BELL: TADAWUL-

The TASI rose 0.9% yesterday on turnover of SAR 4.3 bn. The index is down 6.7% YTD.

In the green: Anaam International Holding Group (+10.0%), Fitaihi Holding Group (+7.8%), and Al-Babtain Power and Telecommunication (+7.4%).

In the red: Almunajem Foods (-9.1%), Saudi Paper Manufacturing Company (-6.0%), and Alamar Foods (-4.2%).

THE CLOSING BELL: NOMU-

The NomuC fell 0.3% yesterday on turnover of SAR 18.3 mn. The index is down 6.9% YTD.

In the green: Amwaj International (+15.7%), Hedab Alkhaleej Trading (+9.9%), and Natural Gas Distribution (+8.2%).

In the red: Molan Steel (-17.7%), Osool and Bakheet Investment (-9.4%), and Miral Dental Clinics (-7.4%).