High debt, growing strains put focus on need for new development approaches
SPY•Rising debt costs and falling aid are pushing developing countries and institutions to seek new funding, including private investment. International aid from OECD donor countries fell 23% in real terms in 2025, while developing countries’ external debt reached $12.3 trillion.
1. Debt and aid pressures
Developing countries are facing high debt levels, rising debt-service costs and a sharp drop in official development assistance. International aid from OECD Development Assistance Committee donor countries fell 23% in real terms in 2025, the biggest annual decline in the history of official development assistance. The five largest donors—the United States, Germany, the United Kingdom, Japan and France—accounted for 96% of the total drop.
2. Seeking new funding
World Bank President Ajay Banga said development efforts would need to bring together public finance, private investment, philanthropy and technology. He said 1.2 billion young people are likely to enter the job market in the next 10 to 15 years, while only 400 million jobs are in sight. Developing countries’ combined external debt stock reached $12.3 trillion in 2025, up $500 billion from 2024.
3. Calls for action
British Foreign Secretary Ed Miliband said debt restructuring and other support for the poorest countries would be a theme of Britain’s upcoming G20 presidency, while arguing that private lenders should take a larger role. Critics said the IMF and other institutions had offered little new help with debt-service costs. The Islamic Development Bank group said it aimed to deploy $10 billion in financing next year.
