Even as differences emerged over the wording of the Russia-Ukraine war in Summary after the first G20 meeting of the Finance Ministers and Central Bank Governors (FMCBG) under India’s presidency, there was consensus over addressing debt vulnerabilities of low and middle-income countries and measures to manage crypto assets with a proposed regulatory framework.
Union Finance Minister Nirmala Sitharaman said the FMCBG arrived at a common position for ‘debt language’. “Vulnerable nations are looking at G20 nations to relieve the debt stress,” she said, adding that four countries – Ghana, Sri Lanka, Zambia and Ethiopia, would benefit from the discussions.
“We welcome the conclusion of debt treatment for Chad and call for a swift conclusion of the work on debt treatment for Zambia and Ethiopia. We also look forward to the rapid formation of the official creditor committee for Ghana to work on the requested debt treatment. Further, we look forward to a swift resolution to Sri Lanka’s debt situation,” Sitharaman said, adding that if a common position for a language on debt could be arrived upon, then the G20 is now standing up to meet the challenges of debt stress which many are facing.
“…we are looking at more efficient and quick resolution. The sheer fact that countries had to wait for years, for instance, Zambia had waited for more than a year-and-a-half, and there have been countries that went back on the request because they waited for two years…the process itself is consuming time, by this time, the distress aggravates…for instance Sri Lanka is waiting for a resolution but in the meanwhile because of delays, they are feeling the stress even more,” she added.
Sitharaman said that from the point of view of getting both sovereign and private creditors to the table and having them agree to a specific formulation in which, there needs to be greater efficiency and coordination among all creditor countries. “That is why when the IMF and World Bank held the roundtable at the deputies level on February 17th…all of them participated- Exim Banks, Central Bank, also private creditors were all brought to the round table,” she said.
The Chair’s Summary issued after the meeting also recognised the urgency to address debt vulnerabilities in low and middle-income countries. “Strengthening multilateral coordination by official bilateral and private creditors is needed to address the deteriorating debt situation and facilitate coordinated debt treatment for debt-distressed countries,” it said.
In December 2022, World Bank said that the world’s poorest countries owe $62 billion in annual debt service, a year-on-year increase of 35 per cent, warning of a rising risk of defaults. Sri Lanka, Bangladesh and Pakistan have sought a bailout from the IMF over the past year due to a sharp economic slowdown caused by the Covid-19 pandemic and the Russia-Ukraine war.
Regarding strengthening Multilateral Development Banks (MDBs), Sitharaman said, “I am very grateful that India’s presidency has received strong support on all our key priorities. India particularly got support for our proposal to bring in an expert panel for providing a narrative for an updated vision of the MDBs, and that can make them capable of meeting cross border challenges.”
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An expert group, proposed by the G20 Indian Presidency, has been mandated to submit a report in three months. “…so that in the July meeting, we will be able to take up the discussions and any follow up that is required,” she said, adding that former Treasury Secretary Larry H Summers would head the panel and former bureaucrat N K Singh would be co-chair.
On crypto-assets, Sitharaman said that G20 members have agreed to deepen discussions and understand their broader implications. “There is almost a clear understanding that anything outside the central bank is not a currency. And this is a position that India has been taking for a very long time, and we are glad that such a position of India is now also getting acknowledgement from so many different members. People recognise that the technology is very useful for fintech,” she said. The Summary mentioned the ongoing efforts to “ensure that the crypto-assets ecosystem, including so-called stablecoins, is closely monitored and subject to robust regulation, supervision, and oversight to mitigate potential risks to financial stability.” It called upon the OECD to conclude the work on the implementation packages concerning the Crypto-Asset Reporting Framework and amendments to the common reporting standard.
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Reserve Bank of India Governor Shaktikanta Das said that the digital payment linkage between India and Singapore attracted much attention at the meeting and can guide the cross-border transfer of money in the future. Talking about Central Bank Digital Currencies (CBDC), the Summary said, “We will continue to explore the macro-financial implications of the potential introduction and widespread adoption of CBDCs and their effects on cross-border payments, as well as on the international monetary and financial system,” it said.
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