The G20 big money makers attacked tax reform and multilateral donors on Tuesday, without much progress on debt restructuring, while the World Bank was alarmed by growing divisions between rich and poor countries.
Several economies remain in trouble after the double shock of the coronavirus pandemic and the fallout from Russia’s war in Ukraine that hits global fuel and commodity prices. Climate change also worsens the situation of the poorest countries and least able to overcome the situation.
A danger of fracture of the world economy
Indian Finance Minister Nirmala Sitharaman, who is chairing and organizing the meeting in Gandhinagar in the western Indian state of Gujarat, opened the proceedings on Monday by reminding finance leaders that they have “a responsibility to guide the world economy towards a strong, sustainable, balanced economy and inclusive growth”.
The president of the World Bank, Ajay Banga, expressed his alarm on Tuesday at the danger of fracture of the world economy, given the absence of progress in the fight against poverty. “What keeps me up at night is the mistrust that silently divides the north and south of the planet at a time when we need to come together,” Banga told the ministers during their discussions on international financial structures.
Priority to the decarbonization of growth
The World Bank is working to increase its lending capacity, including by raising hybrid capital from shareholders, but said the future economy cannot be built on expansion at the expense of the environment. “The truth is simple: We cannot endure another period of intensive growth in CO2 emissions,” insisted Banga, an Indian-American who took up his post at the Bank last month, appointed by US President Joe Biden.
According to the United States, efforts to reform multilateral donors such as the World Bank and regional institutions could unlock $200 billion over the next decade.
A “kingdom of poverty”
“The frustration of the countries of the South is understandable. In many ways, they are paying the price for our prosperity,” he added. “While they should be on the rise, they fear that the promised resources will be diverted to the benefit of the reconstruction of Ukraine,” she continued.
According to Banga, “they feel that energy rules are not applied uniformly, limiting ambitions, and they fear that the reign of poverty will break a new generation.” Debt restructuring deals for low-income countries have been high on the agenda of the top 20 economies, but talks have made little progress, officials say.
China, the world’s second-largest economy and the biggest financial backer of several low-income and struggling countries in Asia and Africa, has so far opposed a common multilateral agreement on the issue.
The debt overhang deepens
More than half of low-income countries are close to or in debt trouble, twice as many as in 2015, US Treasury Secretary Janet Yellen said.
Yellen said on the sidelines of the G20 on Sunday that Zambia’s debt deal had taken “too much time to negotiate,” adding that she hoped the Ghana and Sri Lanka deal could be “finalized quickly.” The finance ministers of India and China, neighbors and rivals, met early Tuesday morning without commenting to reporters.
The G20 discussions also focused on reforming the multilateral development banks, regulating cryptocurrencies, and facilitating access to finance to mitigate and adapt to the impact of climate change. Last week, 138 countries agreed on a first step to distribute tax revenue from multinationals more fairly.
Source: BFM TV
