The communiqué of the G20 finance ministers and central bank governors was released on 13 October and framed yet again by a challenging geopolitical and economic global context. It focused on the interlinked issues of the ongoing conflict in Ukraine, the urgency of meeting the Sustainable Development Goals (SDGs), progressing with multilateral development banks (MDBs) reform, and addressing debt concerns. While the issues covered by the document are obviously relevant and important, those left unmentioned are significant: Recognition of a debt crisis, the need for debt relief and the establishment of an independent debt restructuring mechanism, special drawing rights allocations, successful completion of the IMF’s 16th quota review and commitments to meet overseas development and climate finance commitments, to mention perhaps the most prominent among them.
Continued focus on war in Ukraine
The report’s first seven paragraphs focus on the war in Ukraine, highlighting “different views and assessments of the situation”, and noting that members reiterated their “national positions and resolutions adopted at the UN Security Council and the UN General Assembly.” Whatever the interpretations of the situation, the communiqué called for peace and respect for international law and territorial integrity. It underscored the impact of the conflict in Ukraine on the food security and the development of developing and the least developed countries.
With friends like the G20, the UN seems ok for enemies
Apparently satisfied with the tremendous success of its recent endeavours, and assuming the G20 does a fine job of representing the vast majority of countries that remain outside it, the communiqué reaffirms that “the G20 is the premier forum for international economic cooperation.” The premier forum’s assessment of the global economy is that the economic outlook “remains subdued” with “risks tilted to the downside”. Given the G20 communiqué comes only a month after the UN General Assembly meetings where industrialised nations – which form part of the G20 – struggled to convince sceptical and frustrated low- and middle-income countries that they had nothing to do with the uneven pandemic response and recovery, and differentiated the impact of their monetary tightening on the prospects of the rest of the world and the SDGs, the placement of the G20 on a pedestal of its own making may have struck those outside it as audacious.
Debt: All bets remain on the Common Framework
While the communiqué notes concerns about the evolving debt situation and its impacts on policy space among affected states, it seems to support the IMF’s view that, while worrisome, the debt situation is not systemic and not (yet?) a crisis, as it ‘only’ affects ‘unimportant’ countries in the Global South. This assessment certainly goes against the findings of the latest Debt Servicing Watch briefing released by Development Finance International and others, which stressed that, “debt service numbers are higher than they have ever been.”
The Group’s approach is based on a call for “well-calibrated monetary, fiscal, financial, and structural policies”, and continued reliance on the heavily criticised Common Framework (see Observer Winter 2021). The communiqué “emphasizes” the need to address the debt vulnerabilities in low- and middle-income countries in “an effective, comprehensive and systematic manner.” It stands by the “commitments made in the November 13, 2020 Common Framework for Debt Treatments beyond the DSSI, including those in the second and final paragraphs.” The paragraphs mentioned deal with the need to base restructuring on debt sustainability assessments conducted by the World Bank and IMF (see Observer Autumn 2023), consistency with an Upper Credit Tranche programme and comparability of treatment and the pivotal role of multilateral development banks (MDBs) respectively.
The document welcomes progress on the work toward the finalisation of the protracted negotiations with Zambia and those with Ghana. It calls for the “swift” completion of the negotiations with Ethiopia and, beyond the Framework, welcomes “all efforts for timely resolution of the debt situation of Sri Lanka.” The G20 similarly encouraged continued cooperation and improved communication among participants of the Global Sovereign Debt Roundtable both within and outside the Common Framework. The communiqué ends the debt section by welcoming “joint efforts by all stakeholders, including private creditors, to continue working towards enhancing debt transparency.”
MDBs reform: Continued focus on size and private capital mobilisation
The communiqué dedicates four paragraphs to “strengthening Multilateral Development Banks.” It calls for the delivery of “better, bigger and more effective MDBs by enhancing operating models, improving responsiveness and accessibility, and substantially increasing financing capacity to maximise development impact.” In light of discussions on the Capital Adequacy Framework and other balance sheet optimization strategies deemed required prior to movement on capital increases, the G20 notes its appreciation of the “enhanced dialogue between the MDBs, Credit Rating Agencies and shareholders and encourage continued transparency in the exchange of information and rating methodologies.” The document stresses that changes are required to MDBs’ vision, operating models and financing capacities.
Echoing one of the Annual Meeting’s central themes, the communique encourages MDBs to increase private capital mobilization through the support of “enabling conditions, innovative risk-sharing instruments and new partnerships to maximize their development impact.” This, along with the implementation of all appropriate CAF recommendations, it stresses, would “maximise the leverage effect of potential capital increases,” noting that each MDB board is the best place to determine if and when a capital increase is needed.
In preparation for the coming Spring Meetings, the communiqué calls on International Financial Architecture Working Group to consider the Independent Expert Group recommendations in consultation with MDBs.
In line with widespread concerns about the globe’s likely inability to meet the SDGs, as outlined in September’s Political Declaration of the high-level political forum made during the Sustainable Development Goals Summit, the G20 committed to mobilise “more headroom and concessional finance to boost the World Bank’s capacity to support low- and middle-income countries that need help,” cautioning however about “scarce concessional resources.”
Amid widespread concerns that next year’s 21st replenishment of the International Development Association (IDA), the World Bank’s low-income lending arm, will fail to mobilise an adequate amount of urgently needed resources from developed states, the document calls for an ambitious IDA21 replenishment to increase IDA financing capacity.
While the document fails to mention the ongoing 16th Review of Quotas at the IMF, which should be finalised by the end of the year, it does note that the G20 looks forward to the 2025 shareholding review of the International Bank for Reconstruction and Development (IBRD), the World Bank’s middle-income lending arm, and an ambitious “replenishment of the International Fund for Agriculture Development (IFAD) resources.”
Oddly for the globe’s “premier forum for economic cooperation”, the G20 calls for the IMF and World Bank to continue to support efforts to increase domestic resource mobilization of Emerging Market and Developing Economies, but fails to link those efforts to ongoing efforts to make the world’s unjust tax architecture more equitable (see Observer Spring 2023).
Worryingly, given concerns with the negative social and economic impacts of current approaches to financial inclusion (see Observer Spring 2023, Observer Spring 2022) the communiqué refers to the new G20 2023 Financial Inclusion Action Plan and asks the Global Partnership for Financial Inclusion to continue its work for advancing access, usage and quality of financial inclusion for individuals and micro, small and medium enterprises.