G20 agrees to tackle debt stress in vulnerable nations, manage crypto
Although differences emerged over the wording of the Russia-Ukraine war in the summary after the first G20 Finance Ministers and Central Bank Governors (FMCBG) meeting under India’s presidency, there was agreement to address debt vulnerabilities in 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 on “debt language”. “Vulnerable nations are looking to G20 nations to relieve debt stress,” she said, adding that four countries – Ghana, Sri Lanka, Zambia and Ethiopia – will benefit from the discussions.
“We welcome the conclusion of the debt settlement for Chad and ask for a quick conclusion of the work on the debt settlement for Zambia and Ethiopia. We also look forward to the speedy formation of the Official Creditors Committee for Ghana to work on the requested debt settlement. Furthermore, we look forward to a quick solution to Sri Lanka’s debt situation, Sitharaman said, adding that if a common position could be reached for a language on debt, then the G20 is now standing up to meet the challenges of debt stress that many are facing .
“…we are looking at more efficient and quick solution. The sheer fact that countries had to wait for years, for example, Zambia had been waiting 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 takes time, at this point the distress worsens… for example, Sri Lanka is waiting for a solution, but meanwhile due to delays, they feel the stress even more,” she added.
Sitharaman said that from the point of view of bringing both sovereign and private creditors to the table and getting them to agree to a specific formulation where there needs to be greater efficiency and coordination between all creditor countries. “That’s why when the IMF and the World Bank held the round table meeting at the deputy level on February 17 … everyone participated – the Exim Banks, the Central Bank, also private creditors were all brought to the round table,” she said.
The executive summary issued after the meeting also recognized the urgency of addressing debt vulnerability in low- and middle-income countries. “It is necessary to strengthen the multilateral coordination of official bilateral and private creditors to address the worsening debt situation and facilitate coordinated debt management for indebted countries,” it said.
In December 2022, the World Bank said the world’s poorest countries owed $62 billion in annual debt service, a year-on-year increase of 35 percent, and warned of a growing risk of default. Sri Lanka, Bangladesh and Pakistan have applied for a bailout from the IMF in the past year due to a sharp economic downturn caused by the Covid-19 pandemic and the Russia-Ukraine war.
On 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 received particular support for our proposal to bring in an expert panel to provide a narrative for a updated vision of the MDBs, and which can enable them to face challenges across national borders.”
An expert group, proposed by the Indian G20 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 necessary,” she said, adding that former finance minister Larry H Summers would chair the panel and former bureaucrat NK Singh would be co. -chair.
On crypto assets, Sitharaman said G20 members have agreed to deepen the discussions and understand their broader implications. “There is almost a clear understanding that everything outside the central bank is not a currency. And this is a position that India has taken for a very long time, and we are happy that such a position of India is now also being recognized by so many different members. “People are realizing that the technology is very useful for fintech,” she said. The summary mentioned the ongoing efforts to “ensure that the ecosystem of cryptoassets, including so-called stablecoins, is closely monitored and subject to robust regulation, supervision and oversight to reduce potential risks to financial stability.” It urged the OECD to finish work on the implementation packages regarding the Crypto-Asset Reporting Framework and changes to the common reporting standard.
Reserve Bank of India Governor Shaktikanta Das said the India-Singapore digital payment link attracted a lot of attention at the meeting and could lead the cross-border transfer of money in the future. Speaking of central bank digital currencies (CBDCs), the summary said: “We will continue to explore the macroeconomic implications of the potential introduction and widespread use of CBDCs and their effects on cross-border payments, as well as on international monetary policy. and the financial system, it says.
