The Russian invasion of Ukraine continues to cast a long shadow, not least over the meeting of the G20 Finance Ministers and Central Bank Governors on 12-13 April 2023 at the World Bank and IMF Spring Meetings 2023, as geopolitical tensions yet again prevented the group from issuing a communique.
Reflecting bitter divisions within the group over the invasion, G20 co-chair India’s finance minister Nirmala Sitharaman, told in a press briefing following the meeting that the G20 had not planned to issue a joint statement, adding that the meeting was “intense”. Most members of the group have condemned Russia’s invasion. The group also did not issue a joint statement at the 2022 Spring Meetings (see Dispatch Springs 2022), when Western governments walked out in protest over Russia’s participation (see Dispatch Annuals 2022). At the press conference, Japanese Finance Minister Shunichi Suzuki disagreed with the suggestion that the group was “dysfunctional”, according to Kyodo News, stressing that the objective was for members to meet and discuss challenges.
The call made last year by the Elders, an independent group of former global leaders, to rise above their differences and find consensus has gone unheeded. While disagreements over the Russian invasion of Ukraine between members are likely to be insurmountable, there are many other critical issues, from the looming debt crisis to climate change that require urgent action and on which members of the G20 could collectively and impactfully coordinate – at least in theory.
The press statement issued after the meeting highlighted the group’s limited ambitions. Participants reviewed progress on the three tracks decided in their February meeting: On the global economy and international financial architecture; on sustainable finance, the financial sector and financial inclusion; and international taxation.
Fine words but little action on debt relief
Discussion on the first track focused on leveraging increased development finance and the debt crisis. G20 members agreed that they could help build “a common understanding on fostering a conducive environment for global economic recovery”, and discussed the debt crisis and “strengthening multilateral coordination towards addressing the increasing debt distress in low-income and vulnerable middle-income countries.” They also discussed progress on the implementation of recommendations by the Independent Panel on MDBs’ (multilateral development banks) Capital Adequacy Frameworks (CAF). The CAF review, published in July 2022, proposed that MDBs undertake a concerted effort to boost their lending, including a decreased reliance on external credit rating assessments. However, this could threaten the World Bank’s AAA credit rating and mean it has to raise its borrowing costs, which current President David Malpass has categorically ruled out, and would do nothing to address the fundamental problems with the Bank’s current highly financialised development model (see Observer Autumn 2022).
The G20 also discussed strengthening multilateral coordination on the debt crisis, as well as the effects of the climate crisis and capital flows on debt (see Observer Autumn 2022). Many within the group are creditors and hold significant sovereign debt. G20 members China, France, India and Japan are major creditors of Sri Lanka, which defaulted on its debt for the first time in its history last May and is currently in talks to restructure it. The press statement stressed the need for swift completion of debt treatments under the G20’s Common Framework, which has become mired in beggar-thy-neighbour negotiations between China and other major public creditors. It also mentioned the Global Sovereign Debt Roundtable (GSDR), held on 12 April, which stressed the importance of information sharing, the provision of net positive capital flows through concessional loans and grants from MDBs, and the establishment of common principles on treatment.
Reforming development finance in the interest of investors
The G20’s discussions on the second track considered the role of international financial institutions in leveraging private finance flows for the Sustainable Development Goals. This leveraging will be done by using public funds to ‘de-risk’ private sector investment, which in practice involves shifting risk from private investors to states (see Observer Autumn 2017), imposing significant contingent liabilities on them, potentially adding significantly to their existing debt burdens (see Observer Autumn 2022).
The group also discussed progress on the promotion of social impact investment instruments and leveraging Digital Public Infrastructure for financial inclusion. Social impact investments are very difficult to structure effectively and make profitable for investors, can drive unintended negative results, which Nadine Pequeneza described as “promoting simplistic solutions to complex problems”, while financial inclusion has been linked to rising indebtedness of the poor and economically marginalised, and has a disproportionately gendered impact (see Observer Spring 2023).
Ministers also shared “suggestions on how best G20 can complement global efforts to enhance tax transparency” and discussed the need for coordinated efforts on effective implementation of the OECD’s two-pillar international tax package. This package aims to realise a fairer distribution of taxes paid by large multinational corporations across different countries and would put a floor on tax competition by creating a global 15 per cent minimum effective corporate tax rate. The US and Europe support the OECD’s initiative, but are opposed to the recent initiative to establish a UN tax convention, supported by African nations.
