Developing countries paid nearly $1 trillion in interest on public debt in 2025, up from $363 billion in 2010, according to a UNCTAD report.
Global public debt more than doubled from $49 trillion in 2010 to $111 trillion in 2025, with developing countries recording a faster increase.
Developing countries paid an average interest rate of 5.2%, compared with 2.2% in developed economies.
In 51 countries, home to 3.7 billion people, interest payments exceeded government spending on either health or education.
UNCTAD estimates that developing countries could save $500 billion annually if they borrowed at interest rates comparable to those paid by developed economies.
Developing countries, which also have high development deficits, are draining huge amounts of public resources on interest payments. In many countries, annual interest payments on public debt are much higher than national spending on critical sectors such as health and education.
The United Nations Trade and Development (UNCTAD), in its latest World of Debt report, has warned of the foundational weakening of development spending in developing countries as debt-servicing costs rise at an unprecedented rate.
“Debt should help countries invest in their future. But in many developing countries, the servicing of external debt now exceeds new inflows,” said the UNCTAD report. While debt remains a legitimate financing instrument, the rising borrowing cost is making the situation dire.
According to UNCTAD, global public debt, or borrowing by governments, has more than doubled over the past 15 years, rising to $111 trillion in 2025 from $49 trillion in 2010. While developed countries account for two-thirds of this debt, the developing countries have recorded a much faster rise in debt.
Also, the borrowing cost is much higher for developing countries than for developed countries. This makes the public debt servicing expensive and often one of the highest expenditures in a government's national budget.
Developing countries paid an average interest rate of 5.2 per cent on public debt, compared with 2.2 per cent in developed countries.
“As a result, interest payments on public debt in developing countries rose from $363 billion in 2010 to nearly $1 trillion in 2025,” the UNCTAD report said.
Since 2022, interest payments on external public debt have exceeded net new lending to developing countries, according to the report.
“This means that external borrowing is not providing additional resources for development but instead leaving developing countries increasingly reliant on domestic borrowing, which comes at higher costs,” it said.
High debt servicing cost means a slash on critical development spending. “The rising cost of debt is increasingly affecting governments’ ability to invest in essential public services,” the report said. Its severity can be sensed from the fact that in 51 countries with a population of 3.7 billion, the interest spending was higher than on education or health.
“If developing countries could borrow at rates comparable to those paid by developed economies, they could save an estimated $500 billion a year in interest payments,” UNCTAD said. As per its estimate, this saving could set up 1.3 million primary healthcare centres or ensure a minimum-diversity diet for around 1.6 billion children annually.