THE United Nations Conference on Trade Development (UNCTAD) said that tightening monetary policy, meant to fight inflation, could inflict worse damage globally than the financial crisis in 2008 and the COVID-19 shock in 2020.

It added: “All regions will be affected but alarm bells are ringing most for developing countries, many of which are edging closer to debt default.

“Today we need to warn that we may be on the edge of a policy-induced global recession,” UNCTAD Secretary General Rebeca Grynspan said in a statement.

The report took aim at the Federal Reserve and its interest rate hike, calling it an “imprudent gamble” with the lives of those less fortunate. If central banks don’t “course correct”, the UN agency said, emerging countries could tumble into a series of debt crises and health and climate emergencies.

The report joins a growing chorus of organisations expressing worry about the global economic climate.

World Bank President David Malpass last week warned that a “perfect storm” of stagflation and global recession could reverse years of economic development. World Trade Organization Director General Ngozi Okonjo-Iweala also said last week that the world was “edging” into recession.

The International Monetary Fund recently downgraded its economic projections for 2023.

But apart from joining the chorus, Grynspan said there’s more than one way to lower inflation rates. For instance, she suggested countries could implement a windfall tax — a one-time levy on an industry that has experienced unusually high profits — on oil and gas companies.

“There’s still time to step back from the edge of recession. Nothing is inevitable. We must change course,” she said.

“We call then for a more pragmatic policy mix that deploys strategic price controls, windfall taxes, anti-trust measures, and tighter regulations on commodity speculation. I repeat, a more pragmatic policy mix…we also need to make greater efforts to end commodity price speculation.”

“On net, developing countries are now financing developed ones,” the report said.

“Interest rate hikes by advanced economies are hitting the most vulnerable hardest. Some 90 developing countries have seen their currencies weaken against the dollar this year.”

This situation is a result of the rush to fix interest rates after years of ultra-low rates, with global policymakers failing to lift inflation in that time or to generate healthier economic growth, the UNCTAD added.

“Focusing solely on a monetary policy approach — without addressing supply-side issues in trade, energy and food markets — to the cost-of-living crisis may indeed exacerbate it,” the UNCTAD said.

“Under current supply-chain challenges and rising uncertainty, where monetary policy alone cannot safely lower inflation, pragmatism will need to replace ideological conformity in guiding the next policy moves.”

The UNCTAD suggested that countries look at overdue wage increases and continue to create jobs.

There should also be more public investment in economic and social infrastructure to boost employment, raise productivity, improve energy efficiency and reduce greenhouse gas emissions.

Governments should consider tax reforms — including more wealth and windfall taxes, a reduction of regressive tax cuts and loopholes, and the clamping down of tax havens by firms and high-wealth individuals — the report said.