"Only a third of 10-year-olds are estimated to be able to read and understand a simple written story," according to UNICEF.
The UN launched a new mechanism to help educate vulnerable children across the developing world on Saturday.
The International Finance Facility for Education aims to help lower-middle-income countries -- home to around 700 million out-of-school children -- improve schooling, alongside educate refugees and the displaced.
Announced at the United Nations Transforming Education Summit, the 10 billion euro scheme is not a new fund, but a mechanism to increase the resources available to multilateral banks to provide low-cost education finance.
“Under-resourced schools, underpaid and under-qualified teachers, over-crowded classrooms and archaic curricula are undermining our children’s ability to reach their full potential,” said Catherine Russell, Executive Director of UNICEF, ahead of the UN summit.
The UN body said that education, already "in crisis", was being hit by the fallout of Covid-19, which has caused prolonged school closures while reducing access to quality learning.
Two-thirds of countries have cut their education budgets since the pandemic began, according to the UN.
Combined with the effects of the climate crisis and wars around the world, UNICEF now estimates that only a third of 10-year-olds are able to read and understand a simple written story.
Just under two billion euros has been made available for the new financial mechanism, presented in New York. Eight billion more is expected by 2030.
Speaking alongside his Special Envoy for Global Education, Gordon Brown, UN Secretary-General António Guterres, said financing education was a critical issue.
He recognised that the “world is experiencing multiple crises”, with families, businesses and governments everywhere feeling the pinch, but added: "Education is the building block for peaceful, prosperous, stable societies.”
"Reducing investment virtually guarantees more serious crises further down the line."
The UN's top diplomat said that, while wealthy countries could increase funding for education from domestic sources, many developing nations would struggle to do so and are being hit hard by the cost of living crisis.
“They urgently need support for education,” he said.
The UN’s Transforming Education Summit ends on Monday and the UN General Assembly which brings together some 150 heads of state will start on Tuesday.
It’s the first time since the pandemic that the leaders will meet in person at the UN HQ in New York for a week of diplomatic talks.