A combination of elevated global interest rates and increasing economic risk, especially outside the United States, will leave vulnerable, low-income economies at heightened risk of distress, although high-income emerging economies will be more protected. Following the 2008 global financial crisis, emerging and developing economies attracted significant private capital inflows amid low global interest rates. China also provided significant capital, particularly to low-income and lower-middle-income countries. However, the global monetary tightening cycle began raising debt servicing costs in subsequent years, increasing the financial burdens on vulnerable economies. While the beginning of the COVID-19 crisis in 2020 cut this tightening cycle short, the pandemic's economic shock pushed several mostly low-income countries into severe financial distress and even default. In addition, the United States' rapid post-COVID-19 recovery led to a substantial spike in global interest rates and a stronger dollar, which further weakened many low-income countries' financial positions. As a result, many lower-income...
