Developing countries paid almost $1 trillion in net interest on public debt in 2025, according to the United Nations Conference on Trade and Development (UNCTAD), raising fresh concerns about the growing pressure debt servicing is placing on government finances.
The figure represents a sharp increase from the $363 billion recorded in 2010, demonstrating how substantially interest costs have risen over the past 15 years.
The findings were published in UNCTAD’s World of Debt series, which examines the consequences of rising debt obligations for economic development.
The organisation warned that governments are increasingly being forced to allocate scarce resources to interest payments rather than public services and productive investment.
Billions Face Development Spending Pressure
UNCTAD said approximately 3.7 billion people live in 51 developing countries where interest payments on public debt exceed government expenditure on either healthcare or education.
The comparison illustrates the difficult budgetary choices confronting many governments.
When a substantial share of public revenue is required to service debt, fewer resources may remain available for hospitals, schools, roads and other essential services.
The consequences can be particularly severe in countries where public infrastructure and social services already face major funding gaps.
Borrowing Is Becoming More Expensive
Governments borrow for several reasons.
Debt can finance infrastructure, support economic development or help governments manage temporary revenue shortfalls.
Borrowing can therefore be productive when funds are invested effectively and repayment obligations remain manageable.
However, high interest costs can reduce those benefits.
A government may borrow to finance development but later find that an increasing share of its revenue is being absorbed by servicing previous obligations.
UNCTAD warned that this pattern is becoming a serious challenge across developing economies.
Debt Servicing Can Outpace New Financing
The report highlighted a growing imbalance between resources entering developing countries through borrowing and money leaving through debt servicing.
“Debt should help countries invest in their future,” UNCTAD stated, warning that servicing external debt now exceeds new inflows in many developing economies.
That creates a difficult financing environment.
Countries may continue borrowing while receiving diminishing net financial benefits because substantial resources are required to meet existing obligations.
Higher Interest Rates Increase Pressure
Global financial conditions can intensify these problems.
When international interest rates rise, countries seeking new loans or refinancing existing debt may face higher borrowing costs.
Investors can also demand additional returns from borrowers perceived as risky.
For countries with significant foreign-currency debt, exchange-rate movements can create another burden.
If a domestic currency weakens, the local-currency cost of meeting foreign-denominated obligations can increase.
Nigeria Faces Similar Fiscal Questions
The findings are relevant to Nigeria and other African economies seeking to balance debt obligations with development needs.
Governments must finance infrastructure, education, healthcare and economic reforms while maintaining debt sustainability.
The challenge is not necessarily to eliminate borrowing.
It is to ensure that public debt remains affordable and supports investments capable of improving long-term economic performance.
Transparent debt management, stronger public revenue and effective spending are important components of that process.
UNCTAD Calls Attention to Development Impact
The report reinforces concerns that rising debt costs are becoming a structural development problem rather than simply a financial-market issue.
When governments spend more on interest than on essential services, the effects can extend to employment, productivity and living standards.
For developing countries, restoring the ability to invest in economic development will require careful management of existing obligations and improved access to affordable financing.
The nearly $1 trillion interest bill recorded in 2025 underscores the scale of that challenge.
