World Bank: Leading Countries in Long-Term External Debt
According to the World Bank International Debt Report 2025, the total external debt stock for low- and middle-income countries (LMICs) has reached US$8.9 trillion. Long-term external debt—defined as debt with an original maturity of more than one year—represents the vast majority of this burden, driven by a decade of heavy borrowing for infrastructure and pandemic recovery.
The Top 7 Borrowers
The following seven nations lead the world in absolute volume of long-term external debt stock as of the latest reporting cycle.
| Rank | Country | Long-Term External Debt (Approx. US$ Billions) | Key Debt Components |
| 1 | China | $2,436 | Private sector & commercial loans |
| 2 | Brazil | $1,921 | Sovereign bonds & public debt |
| 3 | Mexico | $880 | Corporate & public sector bonds |
| 4 | India | $746 | Multilateral & bilateral loans |
| 5 | Indonesia | $431 | Public sector energy & infra bonds |
| 6 | Argentina | $316 | Multilateral (IMF) & restructured debt |
| 7 | Turkey (Türkiye) | $308 | Long-term bank loans & private debt |
Key Trends and Risks
The Servicing Squeeze: For the first time in 50 years, developing countries paid out more in principal and interest (US$741 billion) than they received in new financing between 2022 and 2024.
Dominance of Public Debt: Public and Publicly Guaranteed (PPG) debt now accounts for nearly 60% of the total long-term stock for these nations.
Interest Rate Impact: Interest payments for these leading debtors have doubled over the last decade, consuming a record share of government revenue that would otherwise fund health and education.
While high debt levels in nations like China and India reflect the scale of their economies, the rapid accumulation of long-term debt in countries with lower growth, such as Argentina, highlights a growing risk of debt distress in the current high-interest global environment.
China: The Scale and Structure of the World’s Largest Emerging Debtor
As of early 2026, China maintains the highest volume of external debt among low- and middle-income countries. However, unlike many other top-tier debtors, China’s debt profile is unique due to its massive economic scale and the specific composition of its liabilities.
1. The Headline Figures (2025–2026)
According to the World Bank and the State Administration of Foreign Exchange (SAFE), China’s total external debt stood at approximately US$2.37 trillion as of late 2025.
Long-Term vs. Short-Term: Roughly 42.5% of this debt is medium- to long-term (maturities over one year).
External Debt-to-GDP: Despite the large absolute number, China’s external debt-to-GDP ratio is remarkably low at approximately 12.9% to 13%. This suggests that while the debt is large, it remains highly manageable relative to the size of the Chinese economy.
2. Who Holds the Debt?
China’s external debt is not primarily "government" debt in the traditional sense. It is heavily driven by the corporate and financial sectors:
Private & Banking Sector: A vast majority of the debt is held by "Other Depository Corporations" (banks) and non-financial enterprises. This reflects China’s deep integration into global supply chains and trade financing.
Currency Composition: Over 50% of China's external debt is denominated in its own currency (RMB). This is a significant "safety net," as it reduces the risk of a debt crisis triggered by a sudden devaluation of the local currency against the US Dollar.
3. Key Challenges and Risks in 2026
While the external debt is stable, the World Bank and IMF have highlighted specific internal pressures that interact with China's global financial standing:
Local Government Financing Vehicles (LGFVs): Much of the concern in 2026 centers on "hidden" domestic debt used for infrastructure, which can impact the overall creditworthiness of the broader Chinese financial system.
The Property Sector: The ongoing adjustment in the real estate market continues to be a drag on domestic demand, forcing the government to use more fiscal stimulus, which gradually increases the total public debt burden.
Trade Tensions: As a major global exporter, China relies on trade credit. Continued trade disputes or new tariffs in 2026 could fluctuate the "short-term" portion of its external debt, which is largely tied to trade settlements.
Summary Table: China's Debt Profile
| Category | Statistic (Approx.) |
| Total External Debt | US$2.37 Trillion |
| External Debt-to-GDP | ~13% |
| Long-Term Share | 42.5% |
| Local Currency Share | 52% |
| Primary Debtors | Banks and Private Corporations |
Brazil: Navigating High Interest and Sovereign Bonds
Brazil holds one of the largest volumes of long-term external debt among low- and middle-income countries. As of early 2026, its debt profile is characterized by a heavy reliance on sovereign bonds and a significant public sector burden.
1. The Debt Landscape (2025–2026)
Brazil's total external debt reached approximately US$660.4 billion at the end of 2025. While China's debt is larger in absolute terms, Brazil’s debt is more heavily concentrated in the public sector.
Long-Term Focus: Over 80% of Brazil’s external debt is long-term, providing some protection against immediate "runs" on the currency, but at the cost of high interest payments over many years.
National Government Debt: When including domestic obligations, Brazil's total national government debt is approximately US$1.92 trillion, representing about 78.6% of its GDP.
2. The Role of Sovereign Bonds
Unlike many countries that borrow directly from other governments (bilateral debt), Brazil is a major player in the international bond market.
Global Investors: The Brazilian government issues bonds in US dollars and Euros to attract international investors.
Domestic Currency Buffer: Interestingly, more than half of Brazil’s gross sovereign external debt is actually in domestic-currency bonds held by non-residents. This helps mitigate "exchange rate risk"—if the Brazilian Real drops in value, the debt doesn't automatically "balloon" in the same way dollar-denominated debt would.
3. Key Challenges in 2026
The primary concern for Brazil in 2026 is the cost of servicing this debt:
Interest Rates: Brazil has historically maintained some of the highest real interest rates in the world. Even as global rates stabilize, the "interest bill" consumes a significant portion of the national budget.
Fiscal Deficits: The 2026 budget shows a primary deficit, meaning the government must borrow more just to pay the interest on what it already owes—a cycle the World Bank calls the "Interest Squeeze."
External Creditor Status: A bright spot is that Brazil holds massive international reserves (approx. US$350 billion), making the Brazilian Federal Government a "net external creditor." This means it has more foreign assets than it owes in external sovereign debt.
Summary Table: Brazil's Debt Profile
| Category | Statistic (Approx. 2026) |
| Total External Debt | US$660.4 Billion |
| Total Government Debt (Gross) | ~78.6% of GDP |
| Long-Term Share | ~82% |
| Interest-to-Revenue Ratio | Historically High |
| Primary Creditors | Bondholders & Private Investors |
Mexico: Strategic Integration and Long-Term Stability
Mexico ranks as the third-largest debtor among low- and middle-income countries, following China and Brazil. As of early 2026, Mexico’s debt strategy is defined by sophisticated management, long maturities, and a deep reliance on the U.S. economic cycle.
1. The Headline Figures (2025–2026)
According to the latest World Bank and SHCP (Ministry of Finance) data, Mexico’s total external debt stock reached approximately US$657 billion by late 2025.
Public Debt Stability: Mexico's gross public debt-to-GDP ratio is projected to trend around 54.0% to 59.9% in 2026. While higher than in previous decades, it remains lower than many of its G20 peers.
A "Fixed" Profile: A standout feature of Mexican debt is that nearly 99% of its external debt is long-term and issued at fixed interest rates. This shields the country from sudden spikes in global borrowing costs.
2. The Composition of Debt
Mexico’s debt is split between a disciplined public sector and a highly active private sector:
The Bond Market: Mexico is a "darling" of international bond markets. It frequently issues "Sustainable Bonds" and "Century Bonds" (100-year maturity), showing high investor confidence in its long-term solvency.
Currency Mix: Approximately 85% of Mexico's total government debt is issued domestically in Mexican Pesos (MXN). This reduces the risk that a currency devaluation would make the debt unpayable, as the government collects taxes in the same currency it owes.
3. Key Challenges and Risks in 2026
Despite its strong management, Mexico faces specific headwinds this year:
The Fiscal Consolidation: After a period of high spending on flagship infrastructure projects (like the Maya Train), the government is currently under pressure to reduce the fiscal deficit from over 5% to a target of 3.9% of GDP in 2026.
Pemex Contingency: The state-owned oil company, Pemex, remains the world’s most indebted oil firm. The Mexican government has repeatedly stepped in to refinance Pemex’s debt, which effectively transfers private corporate risk onto the public balance sheet.
Trade Sensitivity: As Mexico’s economy is deeply tied to the USMCA (U.S.-Mexico-Canada Agreement), any shifts in U.S. trade policy or tariffs directly impact Mexico’s ability to generate the export revenue needed to service its external obligations.
Summary Table: Mexico's Debt Profile
| Category | Statistic (Approx. 2026) |
| Total External Debt | US$657 Billion |
| Public Debt-to-GDP | ~54% – 60% |
| Maturity Structure | Extremely Long (Avg. 18+ years) |
| Investment Grade | Maintained (BBB/Baa1) |
| Primary Risk | Pemex liabilities & trade volatility |
India: Resilient Growth and Strategic Debt Management
India ranks as the fourth-largest debtor among low- and middle-income countries. As of early 2026, India’s debt profile is defined by high foreign exchange reserves, a moderate debt-to-GDP ratio, and a shift toward commercial borrowing to fuel its rapid infrastructure expansion.
1. The Headline Figures (2025–2026)
According to the Economic Survey 2025–26 and the Reserve Bank of India (RBI), India’s external debt has remained stable despite global geopolitical headwinds.
Total External Debt: Stood at approximately US$746 billion as of late 2025.
External Debt-to-GDP: The ratio is approximately 19.2% to 19.4%. This is considered a "moderate" and sustainable level, significantly lower than many other emerging economies.
The Valuation Effect: A unique feature of India's debt reporting is the "valuation effect." For instance, in 2025, a depreciation of the US dollar led to a valuation loss, technically increasing the debt figure without any new borrowing taking place.
2. Debt Composition: A "Buffer" Strategy
India’s debt is structured to minimize the risk of a sudden financial crisis:
Long-Term Dominance: Roughly 82% of India's external debt is long-term (maturity over one year). This reduces "rollover risk"—the danger of having to pay back large sums all at once during a market downturn.
Forex Reserve Cover: One of India’s greatest strengths is its massive foreign exchange reserves, which reached US$725.7 billion in February 2026. These reserves are sufficient to cover over 94% of the total external debt, providing a massive cushion against external shocks.
Commercial Borrowing: The largest component of India's external debt is External Commercial Borrowings (ECBs) by Indian companies, followed by Non-Resident Indian (NRI) deposits.
3. Key Challenges and Risks in 2026
While India’s external sector is strong, it faces specific internal and global pressures:
Infrastructure Funding: India is currently in the middle of a massive national highway and railway modernization push. While this drives long-term growth, it requires significant capital, much of it raised through external loans or bonds.
The Rupee vs. The Dollar: Between April 2025 and early 2026, the Indian Rupee (INR) depreciated by about 5.4% against the US Dollar. Since over 54% of India's debt is denominated in USD, a weaker rupee makes servicing that debt more expensive for Indian companies.
Interest Rate Differentials: High global interest rates mean that Indian firms borrowing from abroad must pay more in interest, potentially eating into their profit margins and slowing private investment.
Summary Table: India's Debt Profile
| Category | Statistic (Approx. 2026) |
| Total External Debt | US$746 Billion |
| External Debt-to-GDP | ~19.2% |
| Forex Reserve Cover | ~94% of debt |
| Long-Term Share | ~82% |
| Primary Debt Driver | Commercial Borrowings (ECB) |
Indonesia: Prudent Management and Long-Term Stability
Indonesia ranks as the fifth-largest debtor among low- and middle-income countries. As of March 2026, Indonesia’s debt profile is characterized by a "healthy structure" and high investor confidence, with a strong emphasis on long-term maturity to avoid sudden liquidity risks.
1. The Headline Figures (2025–2026)
According to the latest data from Bank Indonesia (BI) and the World Bank, Indonesia's external debt remains manageable relative to its growing economy.
Total External Debt: Recorded at US$434.7 billion as of January 2026.
External Debt-to-GDP: The ratio decreased to 29.6% (down from 29.9% in late 2025). This is well below the safety thresholds set by international financial institutions.
Growth Rate: Annual growth has decelerated to 1.7% (yoy), reflecting a cautious and measured approach to new borrowing.
2. Public vs. Private Debt Structure
Indonesia maintains a balanced split between government and private sector obligations, though their recent trajectories differ:
Government Debt (US$216.3 billion): Primarily driven by foreign loans for state projects and foreign capital inflows into Government Securities (SBN). Notably, 99.98% of government external debt is long-term, virtually eliminating immediate repayment pressure.
Private Debt (US$193.0 billion): Private sector borrowing has actually contracted by 0.7% (yoy) as of early 2026. This decline was led by non-financial corporations paying down existing debt rather than taking on new liabilities.
Sectoral Allocation: Government borrowing is strategically directed toward high-impact sectors:
Health & Social Services: 22.0%
Public Administration & Defense: 20.3%
Education: 16.2%
Construction & Infrastructure: 11.6%
3. Key Resilience Factors in 2026
Foreign Exchange Reserves: Indonesia maintains a robust "shield" with forex reserves at US$156.5 billion. This is enough to cover 6.3 months of imports and the servicing of government external debt.
Currency Stability: Despite global volatility, the Indonesian Rupiah has remained relatively stable, supported by a trade surplus (US$2.66 billion in late 2025) and consistent foreign direct investment (FDI).
"BBB" Investment Grade: Major rating agencies (JCR, R&I, Fitch) have affirmed Indonesia’s investment-grade rating in 2026, citing solid domestic demand and disciplined fiscal rules that keep the budget deficit below 3% of GDP.
Summary Table: Indonesia's Debt Profile
| Category | Statistic (Approx. Q1 2026) |
| Total External Debt | US$434.7 Billion |
| External Debt-to-GDP | 29.6% |
| Long-Term Share | 85.6% (Total) / 99.9% (Govt) |
| Forex Reserves | US$156.5 Billion |
| Primary Creditors | Multilateral Lenders & SBN Bondholders |
Argentina: High-Stakes Debt and the Path to Stability
Argentina ranks as the sixth-largest debtor among low- and middle-income countries. As of early 2026, Argentina’s debt profile remains one of the most complex and closely watched in the world, characterized by significant obligations to the IMF and a major push for fiscal reform under the current administration.
1. The Headline Figures (2025–2026)
According to data from the World Bank and the National Institute of Statistics and Censuses (INDEC), Argentina's external debt has seen continued volatility but also signs of stabilization.
Total External Debt: Reached approximately US$316.9 billion as of late 2025/early 2026.
National Government Debt: The broader figure (including domestic debt) stands at roughly US$454 billion, representing about 73% to 76% of GDP.
Projected Growth: The IMF projects a 4.0% GDP growth for 2026, which is crucial for the country’s ability to "outgrow" its debt burden.
2. The IMF Factor
Unlike China or India, whose debt is largely private or commercial, Argentina’s debt is dominated by official multilateral lending:
The World's Largest IMF Borrower: Argentina owes the International Monetary Fund approximately US$42 billion. In early 2025, a new 48-month Extended Fund Facility (EFF) was approved to help the country transition to a more flexible exchange rate and rebuild its depleted foreign exchange reserves.
Repayment Schedule: 2026 is a critical year, with estimated public administration debt service (repayments + interest) totaling roughly US$22 billion.
3. Key Challenges and Reforms in 2026
The "Milei Effect" continues to dominate Argentina's financial narrative this year:
Fiscal Anchor: The government has maintained a strict "zero-deficit" policy, achieving a small primary surplus in early 2026. This is intended to stop the need for the central bank to print money to fund the government, which historically fueled Argentina's hyperinflation.
Foreign Exchange (FX) Unification: In 2025, Argentina successfully unified its multiple exchange rates. While this caused a temporary "debt shock" as the peso was devalued, it has made the economy more competitive for exporters (agriculture and energy), who provide the US dollars needed to pay back external debt.
Reserve Accumulation: A major risk in 2026 is that official reserves remain low relative to upcoming payments. The government is currently relying on support from the US Treasury (via swap lines) and private capital inflows to bridge the gap.
Summary Table: Argentina's Debt Profile
| Category | Statistic (Approx. 2026) |
| Total External Debt | US$316.9 Billion |
| Government Debt-to-GDP | ~75% |
| IMF Debt (Outstanding) | ~US$42 Billion |
| 2026 Debt Service Due | ~US$22 Billion (Public) |
| Credit Rating Status | Fragile but improving (CCC+/B- range) |
Turkey (Türkiye): Managing High Refinancing Needs and Private Debt
Turkey ranks as the seventh-largest debtor among low- and middle-income countries. As of early 2026, the Turkish debt narrative is defined by a shift toward more orthodox economic policies, a heavy reliance on private sector borrowing, and a massive schedule of upcoming maturities.
1. The Headline Figures (2025–2026)
According to the World Bank and the Republic of Türkiye Ministry of Treasury and Finance, Turkey’s external debt reached record absolute levels in late 2025 before showing signs of stabilization in early 2026.
Total External Debt: Reached US$564.9 billion by the end of 2025.
Long-Term External Debt: Approximately US$397.1 billion (roughly 70% of the total).
External Debt-to-GDP: The ratio stands at approximately 38.2%. While this is higher than India or Indonesia, it is considered manageable if the current economic rebalancing continues.
2. A Private-Sector Driven Profile
Unlike many of its peers, the majority of Turkey's external debt is not owed by the government, but by the private sector:
Private Sector Dominance: Turkish banks and non-financial corporations hold roughly US$199.3 billion in external credit debt. This makes the economy highly sensitive to global credit conditions and exchange rate volatility.
Banking Resilience: Turkish banks have maintained high "rollover ratios" (their ability to borrow new money to pay back old loans), which stayed above 100% in late 2025, signaling continued international investor confidence.
The "Short-Term" Pressure: A significant portion of Turkey's total external debt (over US$170 billion) is due within one year. This creates a constant need for the country to attract foreign capital to "roll over" these obligations.
3. Key Challenges and Outlook for 2026
The Orthodox Pivot: Following the 2023–2024 shift toward higher interest rates and fiscal discipline, inflation is projected to ease to 21%–25% in 2026. This has helped stabilize the Turkish Lira and lowered the cost of new external borrowing.
High Refinancing Needs: Fitch Ratings estimates that Turkey’s debt capital market will exceed US$540 billion in 2026 due to heavy refinancing requirements. The government is successfully diversifying its funding by issuing "Sukuk" (Islamic bonds) and digital bonds.
Reserve Building: A primary goal for 2026 is rebuilding the Central Bank’s net foreign exchange reserves. Stronger reserves act as a "insurance policy" against the high volume of short-term external debt.
Summary Table: Turkey's Debt Profile
| Category | Statistic (Approx. 2026) |
| Total External Debt | US$564.9 Billion |
| Long-Term Share | ~70% |
| External Debt-to-GDP | ~38.2% |
| Primary Debtors | Banks & Private Corporations |
| Credit Outlook | Improving (Positive/BB- range) |
Strategic Debt Management: Best Practices from the World’s Leading Debtors
While the absolute debt figures for these seven nations are high, their ability to maintain economic stability depends on how they manage those liabilities. In 2026, these countries are employing sophisticated "Best Practices" to mitigate risk and ensure sustainability.
1. Prioritizing Local Currency Debt (The "Original Sin" Solution)
A major best practice across Brazil, Mexico, and Indonesia is shifting away from borrowing in foreign currencies (like the US Dollar).
The Strategy: By issuing bonds in their own currency (Real, Peso, Rupiah), these countries ensure that if their currency devalues, their debt doesn't "balloon" in size.
Result: Brazil and Mexico now hold over 80-85% of their total government debt in domestic currency, making them far more resilient to global exchange rate shocks.
2. Extending Maturity Profiles (Avoiding the "Cliff")
Mexico and Indonesia are global leaders in pushing debt payments as far into the future as possible.
The Strategy: Instead of 2-year or 5-year loans, they issue 30-year or even 100-year bonds.
Result: This avoids a "debt cliff" where too many payments are due at once. In 2026, 99% of Indonesia’s government external debt is long-term, meaning they only have to pay small amounts annually rather than huge lump sums.
3. Building Massive Forex "War Chests"
India and China maintain some of the world's largest foreign exchange (Forex) reserves as a deliberate debt-management tool.
The Strategy: India maintains over US$700 billion in reserves.
Result: This acts as a guarantee to international investors. If there is a sudden global crisis, India has enough cash on hand to cover nearly 94% of its entire external debt immediately.
4. "Green" and Sustainable Financing
In 2026, Mexico and Brazil have pioneered the use of ESG (Environmental, Social, and Governance) Bonds.
The Strategy: They tie their borrowing to specific climate or social goals (e.g., protecting the Amazon or expanding rural healthcare).
Result: This allows them to tap into a new pool of "ethical" global investors, often securing lower interest rates than traditional commercial loans.
5. Orthodox Policy Pivots
For countries facing high inflation, like Turkey and Argentina, the 2026 best practice is a return to "Orthodox" economics.
The Strategy: Argentina’s "Zero-Deficit" rule and Turkey’s high-interest-rate pivot are designed to regain market trust.
Result: By proving they can balance their budgets, these nations are seeing their credit ratings improve, which eventually makes it cheaper for them to borrow in the future.
Summary of Best Practices by Country
| Practice | Lead Country | Benefit in 2026 |
| Domestic Currency Issuance | Brazil / Mexico | Protects against USD exchange rate spikes. |
| Ultra-Long Maturity | Mexico / Indonesia | Prevents liquidity crises and "repayment cliffs." |
| High Reserve Coverage | India / China | Provides a "safety net" during global volatility. |
| ESG/Sustainable Bonds | Mexico / Brazil | Lowers borrowing costs through "Green" incentives. |
| Fiscal Consolidation | Argentina / Turkey | Rebuilds investor trust and lowers inflation. |
