Developing Europe and Central Asia external debt jumps 15.3% to $1.34 trillion

External debt for developing Europe and Central Asia jumped 15.3% to $1.34 trillion in 2025, the fastest growth rate among all developing regions according to the World Bank’s International Debt Report 2026. The 18-country group added $178 billion in liabilities, a sharp contrast to the 5.5% increase seen across all low- and middle-income countries. Ukraine and Turkey drove this surge, accounting for two-thirds of the regional rise while their borrowing strategies diverged significantly. Kyiv relied on official lending to fund its war effort, whereas Ankara tapped international capital markets for commercial financing. Kazakhstan and Uzbekistan also borrowed heavily, with these four nations holding 82% of the region’s total external debt stock.

Borrowing patterns and service burdens

The region’s capacity to service obligations fell behind its debt accumulation, creating a severe financial strain. External debt reached 152.2% of exports, up 14.7 percentage points from 2024, marking the largest deterioration among developing regions. Interest payments alone absorbed 6.8% of export earnings, the highest share in any region, while total debt service climbed to 24.8% of exports. Haishan Fu, the World Bank Group’s chief statistician, warned that "these countries are borrowing more, paying more, and in many cases leaving less for long-term development." This warning carries weight given that the debt stock now equals 49% of gross national income, the highest ratio covered by the report. Private lenders have largely avoided Ukraine, whose private claims rose only from $72 billion to $82 billion over the decade, but they dominate Turkey’s portfolio.

Turkey remains the region’s largest debtor, with external debt rising 12.3% to $572.8 billion. Its public sector issued $27.7 billion in bonds in 2025, the second-largest amount among developing countries after Mexico. However, short-term borrowing poses a critical vulnerability, as Turkey’s short-term external debt hit $165.8 billion, equivalent to 29% of its total external debt. Debt service consumed 25% of exports, though the overall debt stock remained modest at 36% of national income. In Central Asia, Uzbekistan saw its external debt increase more than sixfold over the past decade, reaching $88 billion with a 24.7% rise in 2025. The country became the largest international bond issuer among eligible borrowers, raising $3.9 billion last year. Yet its borrowing costs are punishingly high; new private-creditor loans carried an average interest rate of 8.6%, and its 2028 local-currency bond yielded 15.5%.

Kazakhstan presents a different risk profile, with debt service amounting to 64% of exports, the highest ratio in the region. Much of its $183.1 billion debt is not directly attributable to the state, as $115 billion is owed by private companies without state guarantees. About half of this total consists of intercompany lending linked to foreign investment in extractive industries. The Kyrgyz Republic saw its debt-to-exports ratio jump 54% to 215%, while debt service surged 186.7% to 28% of exports. This spike suggests a substantial decline in export earnings, forcing the government to expect spending of $1.8 billion on external debt service in 2027-29. Currency movements also inflated figures, with more than a quarter of the $303 billion rise in public debt across developing countries reflecting the weaker dollar. This effect was particularly relevant in the Balkans, where borrowing is heavily denominated in euros. Montenegro’s central bank reported a 6.6% increase in euro terms, contrasting with the World Bank’s 25% rise in dollar terms due to different definitions. Despite these methodological differences, Montenegro faced one of the heaviest burdens, with debt equaling 118% of national income and 252% of exports.