Saturday, September 23, 2023

In US, Sitharaman focuses on debt reform; consensus eludes G20 FMs

Finance minister (FM) Nirmala Sitharaman and Reserve Bank of India governor Shaktikanta Das chaired the second G20 FM and central bank governors meeting in Washington DC on Wednesday and Thursday.

But a consensus-based joint communique continued to elude the grouping, with a press release on the deliberations expected late on Thursday night.

The grouping held three separate sessions on the global economy and international financial architecture; sustainable finance, financial sector and financial inclusion; and international taxation. Sitharaman also hosted a dinner for the FMs and governors on Wednesday night, besides hosting an informal breakfast for the FMs on Thursday morning.

The first meeting of the FMs and the governors in Bengaluru had failed to come up with a joint communique owing to differences between the West on one hand and Russia and China on the other on the war in Ukraine. India had then released a chair’s summary and outcome statement on the deliberations.

Debt restructuring

According to tweets put out by the ministry of finance, Sitharaman “strongly” called for “timely debt restructuring” and said that the solution to the global debt crisis was closely intertwined with addressing the global poverty challenge as the most indebted countries also host the poorest people. The International Monetary Fund has warned that 15% of low-income countries are already in debt distress; another 45% are vulnerable; and a quarter of emerging economies are at high-risk.

Sitharaman also briefed the G20 on the global sovereign debt roundtable – which the World Bank, the Fund and India co-chairs. The roundtable held its second meeting on Wednesday.

In a statement, the co-chairs said the roundtable had agreed “on the importance to urgently improve information sharing including on macroeconomic projections and debt sustainability assessments at an early stage of the process”. They discussed the role of multilateral development banks in these processes “through the provision of net positive flows of concessional finance”.

The roundtable also agreed that in order to clarify key concepts to support predictability and fairness of debt restructuring processes, a workshop will be organised on how to assess and enforce “comparability of treatment” – which aims to ensure the balanced treatment of the debtor country’s debt by all external creditors. There will also be more work undertaken on principles regarding “cut-off dates, formal debt service suspension at the beginning of the process, treatment of arrears, and perimeter of debt to be restructured, including with regards to domestic debt”.

MDB reform and other engagements

Sitharaman also discussed, with her G20 colleagues, the progress on the agenda of strengthening multilateral development banks (MDBs) – which has emerged as a key issue during the spring meetings. She sought the views of G20 members on the way forward for the expert group set up under the Indian presidency on the issue. The group is co-chaired by veteran Indian policymaker NK Singh and former US treasury secretary Larry Summers.

The FM is scheduled to address a high-level event on enhancing the economic empowerment of women as entrepreneurs and leaders later on Thursday at IMF and continue her bilateral engagements.

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