By: Mathias Hangala
The World Bank has revealed that developing countries paid US$415 billion in interest alone over the past year.
In its report released on Tuesday, the World Bank noted that while the oppressive interest rates of the past five years are beginning to ease, the relief is modest. Lower rates mean many countries may temporarily avoid default as foreign bond investors again show willingness to provide financing.
“But for most nations, these improvements are minor compared to the severe economic setbacks of the decade. The report stresses that the financial turmoil of the early 2020s created a debt shock “like no other,” the report read.
It went on to state that between 2022 and 2024, developing economies experienced a net outflow of US$741 billion, the largest debt-related outflow in more than half a century, as repayments and interest far exceeded new financing.
The human consequences have been alarming: in the 22 most highly-indebted countries, one in every two people cannot afford the minimum daily diet required for sustained health.
The World Bank urged policymakers to use the limited breathing room available today, warning it could dissipate abruptly. The global lender also advised governments to restore debt sustainability by strengthening fiscal management, reducing sovereign risk, and attracting productive investment.
The report also calls for the modernisation of the global mechanisms designed to prevent and manage debt distress, arguing they must evolve to detect risks earlier and support rapid restructuring when crises emerge.
A recent report by the Nordic Africa Institute (NAI) echoed similar sentiments. It notes that over the last decade, following the 2007/2008 financial crisis, rising inflation, stagnant development aid, and difficulties mobilising domestic resources, external debt in Sub-Saharan Africa (SSA) surged.
Since 2013/2014, borrowing rose sharply as low global interest rates, a weaker US dollar, and growth in emerging markets encouraged debt accumulation. The trend was further fuelled by commodity price shocks, widening budget deficits, slowing GDP growth, currency depreciation, and deteriorating macroeconomic conditions across most SSA countries.
According to the World Bank, the external debt stock of low-and middle-income countries hit a record US$8.9 trillion in 2024, including US$1.2 trillion owed by the 78 most vulnerable countries eligible for concessional financing from the International Development Association (IDA).
This comes at a time when average interest rates for developing countries are at their highest since just before the 2008/09 financial crisis.
The report read that although some progress is evident, debt burdens slowing, and creditors agreed to restructure US$90 billion in debt last year.
Countries such as Ghana, Haiti, Somalia, and Sri Lanka secured restructuring agreements that reduced their long-term external debt. Yet, the report warns that avoiding a debt trap is no easier today than a decade ago. Because the global debt management system has not kept pace with changes in creditor composition, the next crisis could be even more devastating.
It stated that today, private creditors hold nearly 60 percent of developing countries’ long-term public and publicly guaranteed external debt, a stark contrast to the past, when concessional loans from the World Bank, IMF, and a handful of wealthy nations dominated.
In 2024, bond investors returned to developing countries, providing US$80 billion more in new disbursements than was repaid.
“This helped some nations ease financial pressures and issue multibillion-dollar bonds to fund deficits or refinance maturing debt. But the borrowing came at a steep price, with interest rates reaching up to 10 percent, double pre-2020 levels,” the report indicated.
However, according to the revelations, all developing nations could access international bond markets, and other financing options shrank. Official bilateral creditors withdrew, collecting US$8.8 billion more in repayments than they disbursed.
As a result, many countries turned to domestic lenders. Among 86 countries with available data, more than half saw domestic government debt grow faster than external debt. This trend often diverts capital away from the private sector, as local banks prioritise buying government bonds over lending to businesses. Domestic borrowing also typically involves shorter maturities, increasing refinancing risks when loans come due, the report read.
“Debt is still accumulating in dangerous ways,” concludes the report, adding that without the necessary changes, today’s temporary easing of financial conditions could lull vulnerable countries into sleepwalking towards an even larger crisis tomorrow.
This year, Namibia fully repaid its N$13.5 billion (approximately US$750M) Eurobond, with payments ending in October 2025, while also seeing its total interest burden increase to over N$14 billion for the 2025/26 fiscal year due to domestic borrowing at rates around 8-9%.
In 2015, Namibia secured a N$13.5 billion Eurobond issued at a 5.2% interest rate, which was fully repaid in October 2025, closing a decade-long financial commitment.
Moreover, interest on domestic borrowing (2025/26) is projected to rise as government secured N$6 billion from local banks such as Standard Bank, First National Bank, and Bank Windhoek at rates of 8.33%, 8.60%, 9.10%, and 9.20% respectively marking a shift in borrowing strategy to domestic lenders in efforts to see reduced reliance on foreign markets and preserve foreign reserves.
In essence, Namibia settled a considerable foreign loan, but its overall interest bill is growing due to domestic borrowing in recent years, according to Finance Minister Ericah Shafudah.
