Debt

Debt plays a critical role in development. It allows countries to invest in key services and infrastructure, including schools, hospitals, and roads—which are vital for economic growth and poverty reduction.

But when borrowing decisions are poorly made, whether due to weak fiscal policies, misguided investments, or complex instruments with opaque terms, progress and development can be put at risk. If growth slows or global shocks occur, debt problems can rise quickly and threaten economic stability.

When a country’s debt is too high to manage, it may need to be restructured—renegotiating the terms with creditors. In other cases, debt can be sustainable overall, but the country may face short-term cash flow problems that make it hard to pay debts while still funding essential public services. The global community needs to support countries in both situations.

Current challenges are most severe in low- and lower middle-income countries. Many of them spend about half of their tax revenues just to pay interest and principal on their debt. In recent years, these countries have spent more on debt service payments than on health, education, and infrastructure combined—about 7.5 percent of their GDP.

The World Bank Group provides inexpensive and critical development support to countries so they can continue improving people’s lives and addressing pressing development needs, including when other creditors withdraw.

By prioritizing concessional lending and grants, our financing to low-income countries provides crucial support without exacerbating debt vulnerabilities.

Our fund for the world’s poorest countries, IDA, has become a lifeline for people in need, providing nearly $84 billion in net positive flows over the past five years (FY21-FY25). Over $34 billion was in grants.

In countries where debt levels are too high to be managed overtime, we work to speed up the restructuring process and reduce uncertainty for debtor countries. We do this by supporting improvements to the G20 Common Framework as part of Global Sovereign Debt Roundtable efforts, which brings debtors and creditors to solutions faster and more predictably.

To support countries struggling to meet debt payments, the World Bank Group, with the IMF, has focus on three pillars: boosting domestic reforms, including resource mobilization, increasing financing from international finance institutions, and making use of liability management operations.

As some countries struggle to make crucial investments due to debt burdens, we are exploring various financial instruments. For example, a debt-for-development swap in Côte d’Ivoire, enabled by a WBG guarantee, replaced expensive debt with cheaper financing, freeing up resources for education. Part of that guarantee was also used to secure a new commercial loan tied to progress on clean energy and reforestation. And in Benin, a World Bank Group guarantee facilitated a government Eurobond buyback, which helped the country reduce debt costs, extend maturities, and diversify its debt portfolio.

To improve countries’ debt transparency—which is critical to building investor confidence—we have launched tools such as the Debt Transparency Heatmap and are modernizing the long-standing Debtor Reporting System. Our Radical Debt Transparency report urges legislative reforms, stronger oversight of unconventional debt, and greater use of automation and reconciliation tools.

And we are increasing our support to debt management offices, helping countries design sound debt policies with proper parliamentary oversight, and improve public disclosure of debt data.