Growing disparities between the rich and poor nations pose a threat to poverty reduction in developing countries, warned the new president of the World Bank, Ajay Banga, during a meeting of G20 finance ministers in India. Speaking on the backdrop of the Covid-19 pandemic, the fallout from the war in Ukraine, and the impacts of climate change, concerns were raised about the vulnerable state of the global economy and its impact on the developing world.
Banga expressed his concern about the growing mistrust that is driving a wedge between the Global North and South, saying, “The Global South’s frustration is understandable. In many ways, they are paying the price for our prosperity.”
Addressing the two-day meeting of finance ministers and central bank chiefs in Gandhinagar in Gujarat, he highlighted the need for equitable resource distribution, consistent application of energy rules, and efforts to lift countries out of poverty.
The World Bank chief stressed the importance of investing in education and creating job opportunities, especially for the growing population of young people in developing nations. He warned that failure to provide them with opportunities could result in a challenge rather than a demographic dividend.
Banga emphasised on the need for sustainable growth, stating, “We cannot endure another period of emission-intensive growth.” The World Bank is working on increasing its financial capability to foster growth and jobs, while also acknowledging the importance of environmental preservation.
The G20 talks were held after Russia on Monday refused to extend a deal allowing critical Ukrainian grain exports through the Black Sea, sparking outrage from the United Nations, which has warned millions of the world’s poorest would “pay the price”.
Debt restructuring for low-income nations was a key topic of discussion. China, a significant lender to stressed developing countries in Asia and Africa, has been cautious about adopting a one-size-fits-all debt restructuring formula due to its substantial investments.
“The Chinese have put a lot of investment into developing nations and… therefore are likely to lose more, and so the resistance could be a function of that,” said South African finance minister Enoch Godongwana.
The International Monetary Fund (IMF) called for a faster and more effective debt restructuring process, emphasizing that delays in reaching agreements disproportionately burden borrower countries and their people.
In addition to debt restructuring, the G20 Finance Ministers and Central Bank Governors, convened under the Indian Presidency, focused on multilateral development banks’ reform, cryptocurrency regulations, fair distribution of tax revenues from multinational corporations, and improved access to financing for climate change mitigation and adaptation. Led by finance minister Nirmala Sitharaman, the meeting aimed to chart the way forward on these issues.
Under the theme of ‘One Earth, One Family, One Future’, the finance ministers and central bank governors of the G20 countries convened in Gandhinagar to discuss critical issues affecting the global economy. The meeting, held on July 17-18, focused on prioritising the well-being of people and the planet while strengthening international economic cooperation and pursuing sustainable, inclusive growth.
The ongoing war in Ukraine remained a significant concern among the attendees. Members expressed their condemnation of the conflict, emphasizing its adverse impact on the global economy, including human suffering, disruptions to supply chains, energy and food insecurity, and financial stability risks. While acknowledging that the G20 is not the appropriate forum to resolve security issues, the leaders recognised the profound consequences such conflicts can have on the global economy, according to the G20 Outcome Document and Chair’s Summary released on Tuesday evening.
Also, the meeting focused on international taxation and the implementation of measures to curb tax evasion. finance ministers and governors shared their insights and perspectives on ways to strengthen global tax transparency and combat illicit financial activities.
Under India’s presidency, the G20 highlighted the importance of capacity building to support the implementation of the proposed ‘Two Pillar Solution’ in international taxation. This solution entails the reallocation of multinational companies’ profits to the jurisdictions where they operate, as well as the establishment of a global minimum tax rate of 15% for these companies.
Central banks reaffirmed their strong commitment to achieving price stability in line with their respective mandates. They emphasised the importance of anchoring inflation expectations and transparently communicating policy stances to limit negative spillovers across countries. The leaders stressed the crucial role of central bank independence in maintaining policy credibility.
