G20 ministers unable to resolve stalemate over debt relief

July 26, 2023|Written by

On 18 July, G20 finance ministers and central bank governors ended two days of talks in India without a final joint statement. Indian finance minister Nirmala Sitharaman explained that the meetings failed “because we still don’t have a common language on the Russia-Ukraine war”.

The disagreement slowed progress on topics including a debt restructuring framework, part of ongoing negotiations on how to assist poorer nations balance debt burdens and transitioning to net zero.

In lieu of a consensus, India released the G20 chair’s summary and outcome document which detailed the meeting’s efforts, and failure, to reach a consensus for such topics as a framework for restructuring debt in distressed poorer nations. The discussions come months after Macron’s climate finance summit also failed to agree on concrete actions for easing the debt burdens for low-income countries.

Sitharaman insisted that addressing the debt issue remains a priority for the G20 this year, and further talks are scheduled during a summit in September. The US came into the negotiations seeking agreement on three key elements of last month’s debt-relief framework for Zambia to be applied to other cases.

One crucial point was to exempt multilateral development banks from taking haircuts on loans. However, China opposed this long-standing practice. Chinese finance minister Liu Kun asserted that multinational creditors should be encouraged to participate in debt-relief efforts under the principle of joint action and a fair burden, as per a statement from the Chinese government.

Regarding debt relief, the US sought agreement on having all bilateral creditors participate in future debt-relief deals without separate negotiations. It also called for the use of debt-sustainability analysis produced by the International Monetary Fund (IMF) and the World Bank to determine sustainable debt levels.

During the meeting, IMF managing director Kristalina Georgieva stressed the importance of a speedier and more effective debt restructuring process, as delays in reaching an agreement disproportionately affect borrower countries and their vulnerable populations.

Furthermore, G20 policymakers discussed ways to increase the lending capacity of multilateral development banks like the World Bank. Ajay Banga, president of the World Bank, proposed several mechanisms to leverage the institution’s AAA credit rating, although no specific endorsement was given.

Despite the challenges faced during the discussions, Sitharaman stated that the G20 endorsed a “roadmap” to unlock more lending resources in the multilateral development banks, with further developments expected before the group’s summit later in the year.

The meeting’s outcome document noted that certain nations concurred on the need to gradually reduce the unrestricted use of oil and gas. Conversely, some participants contended that concerns over emissions could be mitigated by implementing carbon removal technologies.

In other discussions, energy ministers from the G20 also failed to find a consensus on the phasing out of fossil fuels. G20 leaders are scheduled to meet in September in preparation for the Cop28 forum held in Dubai in December.

This page was last updated July 26, 2023

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