Debt resolution, climate policy impact on capital flows dominate G20 meet

New Delhi: Debt resolution of poor and middle income countries and the impact of climate change related policies of nations on capital flows dominated the second G20 finance ministers and central bank governors meeting in Washington.

This comes in the backdrop of climate change related policies becoming important parts of national policies which impact investment decisions of companies. The European Union (EU) is now implementing a carbon border tax as part of its efforts to combat climate change.

During the meeting, which concluded on Thursday in Washington, members discussed the key challenges to the global economic outlook, including the war in Ukraine, food and energy insecurity, climate change, and recent risks to financial stability.

The meeting was held under the Indian G20 presidency on 12-13 April on the sidelines of the 2023 Spring Meetings of the International Monetary Fund and the World Bank Group.

The goal of this FMCBG meeting was to deliberate on the progress made by the various work streams of the G20 Finance Track on the deliverables that were tasked to them by the ministers and governors in the February G20 FMCBG Chair’s Summary and Outcome Document, and to seek guidance on the way forward.

On the debt agenda, discussions focused on strengthening multilateral coordination towards addressing the increasing debt distress in low-income and vulnerable middle-income countries.

Ministers and governors reiterated the need to swiftly complete the ongoing debt treatments under the Common Framework and beyond. Discussions also covered the impact of climate change-related policies on capital flows, among others.

During the session on sustainable finance, financial sector, and financial inclusion, discussions focussed on the mobilisation of resources for climate change, the role of the multilateral financial institutions in catalysing private finance flows for Sustainable Development Goals (SDGs) and the role of the G20 in scaling up and encouraging wider adoption of social impact investment instruments.

“Members discussed the key challenges to the global economic outlook, including the war in Ukraine, food and energy insecurity, climate change, and recent risks to financial stability,” the finance ministry said in a press statement.

G20 members agreed that the group could contribute to a common understanding on building a conducive environment for global economic recovery, and ensuring that the most vulnerable countries and sections of the population are adequately protected.

Finance minister Nirmala Sitharaman told the press that funding of developmental activities is required for low and middle-income countries.

“There are pockets of underdeveloped areas in middle-income countries, especially in the post-pandemic era, which desperately need funding for development,” Sitharaman’s office said in a tweet.

“We’re looking at the World Bank for two core things - extreme poverty alleviation and bringing prosperity post-poverty alleviation. Sustainability and goals related to climate, climate finance and energy transition will now have to be the third pillar,” it added.

Sitharaman also attended a high-level meeting on Sri Lankan debt issues and expressed India’s commitment to support Colombo in dealing with its current economic crisis.

She emphasised that collaboration among creditors is important to ensure transparency and equality in treatment of all creditors in the debt restructuring discussions.

Japan’s finance minister Suzuki Shunichi, Sri Lanka state finance minister Shehan Semasinghe and Emmanuel Moulin, director general of the treasury, France, were present in the meeting. Sri Lanka President Ranil Wickremesinghe participated virtually, an official statement said.

The purpose of the event was to demonstrate the multilateral cooperation regarding the debt restructuring process among the creditors, together with Sri Lanka, it said.

In the event, the ministers announced the launch of the debt restructuring negotiation process on Sri Lanka under the three co-chairs: India, Japan, and France, to lead coordinated debt restructuring of Sri Lanka, it said.