Indian officials are pushing Group of 20 finance chiefs to find common words to describe the world’s challenges, even as delegates from other countries are skeptical they’ll be able to agree on a communique as Russia’s war in Ukraine continues to rage.
(Bloomberg) — Indian officials are pushing Group of 20 finance chiefs to find common words to describe the world’s challenges, even as delegates from other countries are skeptical they’ll be able to agree on a communique as Russia’s war in Ukraine continues to rage.
The official meetings in Bengaluru on Friday and Saturday will also tackle big questions around whether, how, and who should be obligated to offer loan relief to certain low-income countries whose debt distress risks bigger problems for the world economy.
Geopolitical tensions, though, could interfere with those talks as well as other sensitive subjects such as broader multilateral development-bank reform. In a sign of the divide between a US-led coalition and countries who want to keep the war out of discussions altogether, neither Russia nor China have sent top officials to this week’s gathering.
The war is “still a very big elephant in the room,” Indonesian Finance Minister Sri Mulyani Indrawati said Thursday on the sidelines of the event. “It’s becoming very impossible to disentangle between the politics, security, military and the economy.”
Finance ministers representing the Group of Seven once again condemned Russia’s war in Ukraine on the eve of its one-year mark and pledged to increase financial support for Ukraine. At the same time, some of the world’s top economies have warned against losing sight of quickly boosting support to developing and low-income markets.
“We need to work together to ease the debt overhang that is holding back too many countries,” US Treasury Secretary Janet Yellen said Thursday. Yellen said she would push for all bilateral official creditors, including China, to participate in debt restructuring for developing countries in distress.
Rising concerns over debt in a slew of emerging economies forms the backdrop at the gathering of the world’s most influential economies in India’s southern city of Bengaluru, formerly known as Bangalore. France and Indonesia also urged a quick response to help nations facing painful restructuring talks after the pandemic ravaged their economies.
“The international financial architecture must be reformed to ensure greater solidarity for developing countries,” Bruno Le Maire, France’s minister for economy and finance, told India’s Economic Times in an interview published Thursday.
While developed nations encouraged the G-20 to step up efforts to resolve the debt crises, Indonesia’s Indrawati called on creditor nations to make progress on restructuring.
“Traditional creditors like the Paris Club, as well as new creditors like China, need to step in and start to discuss as these countries need fiscal space to serve the debt, which is at the cost of their own survival,” she said on the sidelines of the G-20 meetings.
Urgent Need
About 60% of low-income countries are already in or at high risk of debt distress, according to International Monetary Fund data. Debt worries of South Asian economies such as Pakistan, Sri Lanka and Bangladesh are particularly in the spotlight as the world’s top finance officials gather in the region.
Efforts to negotiate sovereign-debt restructuring in countries that also include Zambia have stalled as Washington and Beijing disagree on the way forward, leaving those economies in a destructive limbo.
“Most urgent is the need to provide debt treatment to Zambia, and to commit to specific and credible financing assurances for Sri Lanka,” Yellen told a press conference. “It’s important for China to cooperate.”
India, the US and other lenders from the Paris Club have been putting increasing pressure on China to take a haircut on loans to poor nations as they race against time to restructure debt.
China, meantime, is only offering to extend the repayment schedule as it pushes to include loans made by the World Bank and other multilateral lenders in any restructuring. That’s partly driven by a Chinese view of those institutions as proxies for US power.
Spain’s Economy Minister Nadia Calvino said the role of multilateral lenders like the World Bank should not be undermined and urged key global creditors to contribute to debt relief efforts.
“We need to find a balance and the right approach that provides relief without weakening the common safety net,” Calvino told Bloomberg Television in an interview.
–With assistance from Claire Jiao, Grace Sihombing, Viktoria Dendrinou, Haslinda Amin and Yoshiaki Nohara.
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