High debt levels, rising debt-service costs, and a sharp drop in official development assistance are forcing developing countries and institutions that help them to rethink development and seek new sources of funding, including from the private sector.
World Bank President Ajay Banga, who has led a drive that has more than tripled private capital flowing to development projects since 2022, told the annual IMF and World Bank meetings that changes were needed to help countries address persistent conflicts, falling official development assistance and rising debt burdens.
A huge demographic challenge was also unfolding, he said, with some 1.2 billion young people likely to join the job market in the next 10 to 15 years, but only 400 million jobs in sight.
The answer, Banga said, would depend on bringing public finance, private investment, philanthropy, and technology together to meet each country’s needs.
British Foreign Secretary Ed Miliband said he would make debt restructuring and other assistance for the poorest countries a key theme of Britain’s upcoming G20 presidency. However, he said the private sector needed to step up, as Britain and other wealthy nations could not provide the same level of support as during the last major debt-forgiveness push at the turn of the millennium.
“The risks of lending to emerging markets have been overestimated, and the risk of default has been overestimated,” he told a panel last week hosted by the Rockefeller Foundation, a private US foundation that works on development.
Developing countries are also looking for answers beyond the two Bretton Woods institutions, disappointed by their response to high debt levels, climate change, worsening inequality, and geopolitical challenges.
International aid from donor countries belonging to the OECD Development Assistance Committee fell 23% in real terms in 2025, marking the biggest annual drop in the history of official development assistance.
The five largest donors—the United States, Germany, the United Kingdom, Japan, and France—all cut aid, together accounting for 96% of the total decline.
Meanwhile, developing countries’ combined external debt stock reached USD 12.3 trillion in the same year, up by half a trillion dollars from 2024, according to UNCTAD, the official UN body responsible for trade, investment, and development issues.
US President Donald Trump’s sweeping tariffs have added to the pressure, prompting many developing countries and emerging markets to forge new trade partnerships that exclude the United States.
Eric LeCompte, executive director of Jubilee USA Network, which advocates for debt relief, said this year’s meetings had been a major disappointment for developing countries.
They produced no new initiative to help countries already facing steep debt-service payments and soaring borrowing costs.
LeCompte said the IMF had failed to reach critical mass to launch its expanded “Poverty Reduction and Growth Trust,” which provides low-interest loans to low-income countries.
The fund’s “Catastrophe Containment and Relief Trust,” which provides grants for debt relief to the world’s poorest countries, also received little attention.
“There was a lot of information about how challenging problems are, but we saw hardly any action,” he said, apart from adjustments to debt restructuring plans by the Global Sovereign Debt Roundtable.
“We were expecting more,” LeCompte added.
Jean Saldanha, director of the European Network on Debt and Development, questioned the lack of emergency support for countries struggling to finance essential services.
“Where are the emergency measures to stop countries in the Global South being forced to spend more on debt than on health and education? And where are the serious policy responses to the escalating climate emergency, boosted by a Super El Nino?” she asked.
She stated that the least-developed countries have clearly expressed their need for increased climate grants, reduced debt, simplified access, and expedited disbursements.
Muhammad Al Jasser, chairman of the Islamic Development Bank Group, told Reuters that interest was growing in securing private-sector funding to supplement increasingly scarce public resources.
“The challenges are huge. We’re not going to solve them either single-handedly or even collectively in a short period of time, but I think we are (heading) in the right direction,” he said.
Al Jasser added that the bank was aiming to deploy USD 10 billion in financing next year.
The push to bring private investors into development finance comes as governments face competing demands, including debt repayments, climate-related spending, and the need to create jobs for growing populations.
With official aid falling and borrowing costs rising, developing countries are pressured to find alternative ways to fund projects and support economic growth.
The discussions at the IMF and World Bank meetings highlighted the scale of the challenge facing development institutions and their borrowing countries.
While mobilising private capital is increasingly viewed as part of the response, analysts’ calls for debt relief, climate grants, and faster financial support remain unresolved.