G20 finance and bank chiefs to tackle debt crisis

Workers work near the venue of G20 Finance Ministers and Central Bank Governors meeting at Gandhinagar in Gujarat, India July 13, 2023. REUTERS/Amit Dave/File photo

GANDHINAGAR, India  -G20 finance and central bank chiefs begin talks on Monday to discuss debt restructuring deals and fairer international tax agreements, aiming to bolster a sagging global economy.

Chaired by India’s Finance Minister Nirmala Sitharaman, broad areas for debate include the health of the global economy and “sustainable finance and infrastructure”, hosts said.

Key on the two-day agenda will be efforts to tackle debt distress, with the world’s poorest countries bearing the brunt of the global debt crisis — at a time when they need more cash than ever to fight climate change.

READ: Global public debt hits record $92 trillion – UN report

READ: Global debt on the rise, emerging markets cross $100T mark -IIF

But China, the world’s second largest economy and a major lender to several stressed, low-income countries in Asia and Africa, has so far resisted a common multilateral understanding on the issue, officials said.

READ: China’s debt relief to poor countries slows amid appeals for support

US Treasury Secretary Janet Yellen, speaking on the sidelines of the G20 talks on Sunday in the Indian city of Gandhinagar, cited debt restructuring progress in Zambia, which she had discussed when visiting Beijing this month.

Yellen said the Zambia deal had taken “too long to negotiate”, and added she hoped debt treatments for Ghana and Sri Lanka could be “finalized quickly”.

“We should apply the common principles we agreed to in Zambia’s case in other cases, rather than starting at zero every time,” Yellen said. “And we must go faster.”

READ:  Zambia seals $6.3-B restructuring in breakthrough for developing nations

More than half of all low-income countries are near or in debt distress, double the case in 2015, Yellen added.

A top official from G20 chair India said there had been a “not so encouraging response” from Beijing on shared debt understanding.

Several economies struggling following the double blow of the coronavirus pandemic and fallout from Russia’s war in Ukraine — which hit global fuel and commodity prices — are “reaching a cracking point”, the official added.

China is a major creditor in some of these cases and has faced criticism for its stand on nations’ debt restructuring.

Climate finance

The Group of 20 major economies will also discuss multilateral development banks’ reform, cryptocurrency regulations, and making access to financing to mitigate and adapt to the impacts of climate change easier for the poorest nations.

READ: Developing countries need $1T a year in climate finance -report

“In the Global North, climate change means emissions reductions,” World Bank chief Ajay Banga said in an op-ed ahead of the meeting.

“But in the Global South, it is a matter of survival, because hurricanes are stronger, heat-resistant seeds are in short supply, drought is destroying farms and towns, and floods are washing away decades of progress.”

A newly agreed first step on a fairer distribution of tax revenues from multinational firms reached by 138 countries last week is also set to be delivered.

Multinationals, especially tech firms, are currently able to shift profits easily to countries with low tax rates even though they carry out only a small part of their activities there.

But there is also concern that developed G7 member countries’ focus on Russia’s invasion may derail a final consensus agreement, although Yellen has said she would “push back” on criticism that there was a tradeoff between aid to Ukraine and developing nations.

Japan’s Finance Minister Shunichi Suzuki on Sunday “reconfirmed the G7’s unshakeable support” to Ukraine, adding that Moscow should also “pay long-term reconstruction costs”.

Any discussion on Ukraine is awkward for G20 host India, which has not condemned Russia’s invasion but is also part of the Quad grouping alongside Australia, the United States and Japan.