Global lender cites volatile economic conditions, rising debt service and trade tensions, even as it mobilises $67bn in private capital to support emerging markets……
The World Bank has warned that developing economies are facing mounting fiscal pressure, having spent three consecutive years paying more in debt servicing than they received in new external financing.
In its 2025 Year in Review report titled “Resilient Economies, Smart Development, and More Jobs,” the Washington-based institution said the period between 2022 and 2024 marked a historic high in debt outflows for poorer nations.
“For the third year in a row, developing economies paid more in debt service than they received in new financing,” the bank stated, noting that the stretch represents the highest level of debt outflows recorded in five decades.
A Year of Economic Whiplash
According to the report, 2025 was defined by sharp shifts in global sentiment. Early optimism gave way to caution as countries grappled with slower growth, geopolitical tensions, policy uncertainty, trade friction and persistent debt burdens.
Despite these headwinds, the bank said the global economy demonstrated resilience. Growth is projected at about 2.7 percent this year, broadly matching forecasts made at the start of 2025.
The institution credited that resilience to rapid adaptation across economies, including supply chain restructuring, expanded export diversification and accelerated adoption of digital technologies such as artificial intelligence.
Nigeria’s Rising Debt Profile
The findings come as Nigeria continues to navigate its own fiscal challenges.
Data from the country’s Debt Management Office show that total public debt rose to approximately N152.40 trillion as of June 30, 2025, up from N149.39 trillion earlier in the year.
External debt accounts for nearly $47 billion of that figure, with the World Bank remaining Nigeria’s largest single external creditor at roughly $18 billion outstanding.
The sustained rise in debt underscores the broader dilemma facing developing economies: balancing growth needs against tightening global financial conditions and elevated borrowing costs.
$67bn Mobilised to Crowd in Investment
Amid these pressures, the World Bank said it mobilised $67 billion in private capital over the past two years, up sharply from $47 billion previously signalling what it described as growing investor engagement in emerging markets.
Total commitments, including private capital mobilisation, reached $186 billion. In addition, the institution raised $79 billion from private investors through bond issuances.
The bank also announced plans to triple its guarantee business by 2030, centralising its guarantee operations within the Multilateral Investment Guarantee Agency to streamline access and expand risk-sharing tools.
According to the lender, scaling up guarantees is essential to de-risk private investments at a time when many governments lack fiscal space to finance development through public borrowing alone.
“These goals cannot be accomplished by any one government or development agency alone. To make them a reality, we must also fully mobilise the private sector,” the report noted.
A Shift Toward “Smart Development”
The bank said its strategy remains anchored on resilience, fiscal sustainability, institutional trust and job creation.
Commenting on the report, Ajay Banga, President of the World Bank Group, said the institution’s long-term objective is to help countries build strong domestic private sectors capable of converting economic growth into local employment opportunities.
The aim, he said, is not to relocate jobs from advanced economies, but to unlock opportunity in the places where people already live.
As global volatility persists, the message from the World Bank is clear: without deeper private sector participation and smarter development strategies, the debt pressures facing developing economies could become even more difficult to manage.
