Pointing to evidence of a looming debt crisis in poor countries, the UN said the sharp rises in interest rates from the major central banks since 2021 had increased inequality and reduced investment but proved a blunt anti-inflation weapon.

Richard Kozul-Wright, the director of Unctad’s globalisation and development strategies division, said: “The global economy is stalling, with Europe teetering on the edge of recession, China facing strong headwinds and financial stresses are reappearing in the United States.

“Rising interest rates, weakening currencies and sluggish export growth have combined to squeeze the fiscal space for essential needs, transforming the growing debt service burden into an unfolding development crisis.”

Warning that almost a third of low- or lower-middle income “frontier economies” were on the precipice of debt distress, the UN body said addressing the issue was paramount since meeting the demands of their creditors was “crushing too many developing countries”.

Inflation had come down from its highs in late 2022 but its descent had been uneven and was caused largely by the easing of supply-side pressures, Unctad said, adding that the recent rise in oil prices would add to cost of living concerns at a time when insufficient wage growth was squeezing household budgets.

Unctad’s secretary general, Rebeca Grynspan, said: “To safeguard the world economy from future systemic crises, we must avoid the policy mistakes of the past and embrace a positive reform agenda.

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