The two-day meeting of finance ministers and central bank heads of the G20 countries concluded in Bengaluru on Saturday, reiterating the need for well-calibrated policies aimed at growth and stability and making significant progress on how to structure coordinated debt relief to countries in dire need. They also resolved that “central banks would remain strongly committed to achieving price stability.”
However, the deliberations could not produce a joint communique, given the irreconcilable differences between the G7 segment of the grouping and Russia-China on how to describe the one-year-old Ukraine conflict — the former insisted on unequivocal condemnation of Russia for invasion of its neighbour, while Russia, with support from China, wouldn’t budge and demanded that it be called “a special military operation.” As the chair, India had sought a consensus and suggested the word “war” could be dropped.
The group of countries, which represents 85% of the world GDP, also pledged to “fight protectionism and encourage concerted efforts for reform of the WTO,” besides committing to bring the crypto-assets ecosystem under “robust regulation and oversight” to mitigate any potential risks to financial stability.
Finance minister Nirmala Sitharaman, the chair of the meeting, issued a 14-page “summary and outcome document” with 17 paragraphs and annexures at the end, reaffirming the November 2022 Bali declarations of the G20 leaders. It was stated two paragraphs dealing with Ukraine were not endorsed by Russia and China.
Addressing the media later, Sitharaman said the ministers reiterated the need for “a well-calibrated monetary, fiscal, financial and structural policies in order to promote macro economic and financial stability and also to maintain growth momentum.”
The ministers and central bankers conceded that “global growth remains slow, and downside risks to the outlook persist, including elevated inflation, a resurgence of the pandemic and tighter financing conditions.”
“We will prioritise temporary and targeted fiscal support to vulnerable groups while maintaining medium-term fiscal sustainability. Central banks… will ensure inflation expectations remain well anchored…” they stated.
The G20 ministers also underlined the importance of supply-side policies, especially policies that increase labour supply, boost growth and alleviate price pressures. While protectionist tendencies are very much visible among members, they also reaffirmed the rules-based, non-discriminatory, fair, open, inclusive, sustainable and transparent multilateral trading system with the World Trade Organization (WTO) at its core in restoring growth and job creation.
On the issue of debt relief to the most vulnerable countries, which India pressed for as the chair, some headway was achieved. The statement said. “We recognise the urgency to address debt vulnerabilities in low and middle-income countries. Strengthening multilateral coordination by official bilateral and private creditors is needed to address the deteriorating debt situation and facilitate coordinated debt treatment for debt-distressed countries. We stand by all the commitments made in the ‘Common Framework for Debt Treatments beyond the DSSI’, including those in second and final paragraphs, as agreed on November 13, 2020, and step up the implementation of the Common Framework in a predictable, timely, orderly and coordinated manner.”
Sitharaman said one of the successes of the negotiations was to arrive at a common position on the text of the statement.
“It is important for us to emphasise that the vulnerable countries are looking up to the G20 to find some solution whereby their debt stress can be relieved and many of them have been waiting for a very long time. So if we could arrive after so much negotiation at a common position of dealing with that, I think the G20 is now standing up to meet the challenges of debt stress, which many countries are facing,” she said.
Four countries including Sri Lanka will benefit from the debt resolution.
According to the statement, the adequacy of IMF quotas will be revisited and process of the Fund’s governance reform will continue.
On the issue of the international coordination on tax policies, the G20 ministers said they remained committed to “swift implementation of the OECD/G20 two-pillar international tax package.”
They urged OECD/G20 Inclusive Framework on Base Erosion and Profit Shifting (Inclusive Framework) to finalise Pillar One, including the remaining issues so that the Multilateral Convention can be signed in the first half of 2023.
The meeting also decided, endorsing a proposal from India, to ask the IMF and the Financial Stability Board (FSB) to bring out a joint technical paper on crypto-assets. New Delhi envisages to synthesise the macroeconomic and regulatory perspectives of crypto-assets by the next meeting of G20 finance ministers and central bank chiefs in October 2023.
At the previous G20 leaders’ meeting at Bali in November 2022, western countries insisted on a strong condemnation of Russia’s invasion of Ukraine in the joint communique, which was opposed by some other countries. The Bali Declaration was finally issued after the summit, rejecting the “use or threat of use of nuclear weapons” and stated: “The peaceful resolution of conflicts, efforts to address crises, as well as diplomacy and dialogue, are vital. Today’s era must not be of war.”