The G20 meeting of finance ministers and central bank governors during the Spring Meetings of the World Bank and International Monetary Fund closed the Spring meetings (see Dispatch Springs 2024), as planned, without a communiqué or chair statement. Instead, Brazilian Minister of Finance Fernando Haddad and Central Bank President Roberto Campos Neto and other senior officials took questions at a brief press conference leaving us with more questions than answers.
Urgent BWIs governance and other reforms to the international financial architecture urgently required to tackle the globe’s interrelated crises, such as a new IMF quota formula, increased concessional finance, delivering on debt restructuring, and tackling inequality and food insecurity – continue to be hindered by lack of political will, largely from the Global North. Despite Brazil’s strong efforts to push a progressive reform agenda, the G20 failed to deliver agreement on any of these key issues during the Meetings. In this fragmented geopolitical situation, Brazil – arguably one of the most progressive governments to hold the G20 presidency lately – is working hard to spearhead proposals to increase public revenue and advance discussions on debt restructuring. Brazil’s ambition for its G20 presidency is much needed, however divergent priorities within a group challenged by severe power imbalances and geopolitical tensions prevented substantive progress. Alas, Brazilian aspirations outlined in the press release, that this year’s G20 should be a “moment of harmonization, systematizing knowledge and building a portfolio of benchmark public policies,” remained more aspiration than reality.
The questions at the press conference focused strongly on the impact on the persistence of inflationary pressures in the US and the corresponding reluctance of the US central bank to lower interest rates – a step necessary to alleviate the strained conditions faced by middle- and low-income countries. Brazilian officials underscored that elevated debt vulnerabilities and subdued long-term capital flows and related high capital costs to emerging markets and developing economies (EMDEs) make evident the need for urgent concessional financing and for multilateral development bank reforms (MDBs). There was a clear implication that the drive for more responsive and well-capitalised MDBs must go beyond the current focus on the World Bank. The G20 February communiqué, the last issued, noted the group is looking at a range of financing options including development assistance, domestic resource mobilisation, technical cooperation and private capital mobilisation, but no particular agreement was reached on any of these revenue mobilisation topics. As noted, the press conference implicitly highlighted the imbalances of power in the global economy, as evidenced by the role of the dollar and corresponding impact of US monetary policy well beyond its domestic borders (see Observer Autumn 2022). Brazilian Finance Minister Fernando Haddad highlighted that current US interest rates “are making debt service unpayable” and called for greater speed of action by MDBs and increased concessional lending.
Brazil leading the way on efforts to increase public revenue through taxing the rich
Mainstreaming inequality was highlighted as a key policy concern in the February communiqué. As G20 president, Brazil aims to advance this goal and to build international consensus on the taxation of wealth this year highlighting, “International taxation is not merely the favorite theme of progressive economists; it is an issue of key concern that is at the heart of the global macroeconomic issue.” This idea is slowly gaining momentum among G20 members, with France expressing support for the Brazilian proposal, highlighting that the G20 should reach an agreement on taxing the rich by 2027. The proposals put forward include a wealth tax of 2 per cent for the world’s 3000 billionaires as well as advancing implementation of the 15 per cent global minimum corporate tax on the biggest multinational companies, following African state’ successful proposal for a tax convention at the UN (see Observer Winter 2023). Brazil will push for a joint declaration at a meeting of G20 finance ministers and central bankers in July.
The IMF’s newly reappointed Managing Director, Kristalina Georgieva (see Observer Spring 2024) supports this idea noting that closing tax loopholes and ensuring that the richest paid their fair share would mobilise funds urgently needed for sustainable and inclusive growth. A study by EU Tax Observatory showed that ending tax avoidance by corporations could generate an additional $200 billion a year in revenue – equivalent of 2 per cent of the nearly $13 trillion in wealth owned by the world’s billionaires, while implementation of a global corporate minimum tax would result in an additional $150 billion. If successful, this would be a significant milestone in global wealth redistribution, however the proposal remains rather modest, with Oxfam estimating that an annual wealth tax of more than 8 per cent across all countries would have been needed to keep billionaires’ wealth constant over the last two decades.
Debt restructuring: Doing what we can with what we have
Brazil was also keen during the Meetings to progress discussions on the debt restructuring process during the Global Sovereign Debt Roundtable convened at Springs. The 17 April co-chair statement outlined progress in some sovereign debt cases, including agreements reached by Zambia, Ghana and advanced discussions in the cases of Suriname and Sri Lanka. Some agreements were reached on transparency and coordination amongst creditor groups, as well as improving the timeline for more efficient and predictable debt restructuring processes. In the context of the current debt crisis, in which half of the world’s population live in countries that pay more on debt service than education or health, these conclusions are just tinkering at the margins, far from delivering the much needed debt relief for low- and middle- income countries (see Observer Spring 2024).
As G20 president, Brazil will organise another workshop with the Paris Club in June in the hope of making progress on the issue of comparability of treatment – the key obstacle in debt restructuring talks for both Zambia and Ghana. More still needs to be done, with current restructuring deals unlikely to deliver on long-term debt sustainability as they include contingency clauses with bondholders to increase payments if countries reach positive economic results showing yet again that creditor’s profits are prioritised above all else, hampering countries abilities of economic sustainable recovery.
Civil society organisations (CSOs) following the trials and tribulations of Brazil’s efforts to facilitate concrete steps on its progressive agenda discussed how they can best support Brazil’s initiatives while recognising that the G20 remains an undemocratic and unrepresentative group of rich nations, and calling for deliberations to take place within the UN system. CSO discussions also focused on how to best ensure continuity of a progressive agenda during the South African G20 presidency that begins next year.
