Group of 20 finance ministers and central bank governors begin two days of meetings Monday, with participants discussing items including reform of multilateral development banks, debt relief for stressed developing nations and sustainable finance.
(Bloomberg) — Group of 20 finance ministers and central bank governors begin two days of meetings Monday, with participants discussing items including reform of multilateral development banks, debt relief for stressed developing nations and sustainable finance.
The gathering in Gandhinagar, capital of Indian Prime Minister Narendra Modi’s home state of Gujarat, is also serving as a setting for a raft of bilateral meetings. Treasury Secretary Janet Yellen on Monday engaged with her Indian counterpart, Nirmala Sitharaman — part of a broader push by the US to strengthen ties with the nation.
The meetings occur against a backdrop of tensions among G-20 members, capped off by US-China geostrategic rivalry and divisions over Russia’s invasion of Ukraine. The group’s finance chiefs haven’t agreed on a communique since February 2022, on the eve of the war.
“The G-20 has become a microcosm of global fractures,” said Philippe Dauba-Pantanacce, an economist and global geopolitical strategist at Standard Chartered Plc. While developed democracies have a “newfound sense of unity,” big emerging markets have “wide divergences in how/where each positions itself in this fragmenting world.”
Key Developments
- EU’s Gentiloni Says Too-Restrictive Fiscal Rules Unrealistic
- India, Indonesia Plan Local Currency Trade, Fast Payments Links
- Indonesia Upbeat on 5% Growth Despite Gloomy China Outlook
- Yellen Eyes China De-Escalation, But Lifting Tariffs ‘Premature’
- G-20 Host India Seeks Bilaterals for Consensus Language on War
(All times local)
Japan Calls Out Need to Monitor Impact of Monetary Tightening in FX (6:46 p.m.)
Japan’s top international financial official called out the need to keep watching for the effects of monetary tightening in the foreign-exchange market.
The yen in late June and early July hit its weakest levels of the year against the dollar amid expectations for the US Federal Reserve to keep raising interest rates. Japan’s government has faced domestic concerns about a weakening yen undermining households’ purchasing power.
Masato Kanda, Japanese vice finance minister for international affairs, told reporters in Gandhinagar that his country had pointed out in the G-20 meetings Monday the need to carefully monitor the impact of continued monetary tightening on the currency market.
G-20 countries discussed the global economy, health, sustainable finance and infrastructure, Kanda also said. Many countries, including Japan, blamed Russia’s invasion of Ukraine for having a severe impact on the global economy, he said.
World Bank President Banga Turns Into Optimist on India (6:36 p.m.)
Newly installed World Bank President Ajay Banga said that while the global economy is under stress, he’s become the most positive on his native country India than in some time.
“I’m more optimistic about India today as a whole than I have been for a long time,” said Banga, who was born in India and built a career in finance and business before the Biden adminstration tapped him to lead the World Bank.
Speaking to reporters in Gandhinagar, he also said, “The world economy is in a difficult place” but it’s course isn’t set in stone. Last month, the lender boosted its global GDP forecast for this year, but cut it for 2024.
For India, the World Bank sees 6.3% expansion for the 2023 fiscal year, with growth also in excess of 6% in the following two years.
Yellen Says China Slowdown Risks Spillovers But No US Recession (6:16 p.m.)
Treasury Secretary Janet Yellen said that China’s economic slowdown risks causing ripple effects across the global economy, though she doesn’t expect a recession in the US.
“Many countries do depend on strong Chinese growth to promote growth in their own economies, particularly countries in Asia, and slow growth in China can have some negative spillovers for the United States,” Yellen said in a Bloomberg Television interview.
In the US, “growth has slowed, but our labor market continues to be quite strong. I don’t expect a recession,” she said.
US Wants Principles of Zambia Debt Deal for Other Debtors (4 p.m.)
While the terms of a recent agreement to restructure Zambia’s debt cannot be precisely replicated for other stressed nations, the principles included ought to be applied broadly, according to a senior US Treasury official.
Those basic principles are the following, the official said, speaking on condition of anonymity to describe the US position:
- All bilateral creditors participate in the same deal, with no separate negotiations.
- Debt-sustainability analysis from the International Monetary Fund and World Bank is used to determine a sustainable debt load.
- Multilateral development banks aren’t required to take haircuts on lending, but instead contribute via fresh lending at concessional — or ultra-low — interest rates.
This is a good set of principles that can be applied to subsequent cases, and the US is seeking practical agreement among G-20 members on it, the official said.
Talks on Expanding Debt Relief Moving ‘Slowly,’ Gentiloni Says (11:30 a.m.)
European Economy Commissioner Paolo Gentiloni said that “it is much needed” to use the recent debt-relief agreement for Zambia as a template for others, but negotiations among G-20 members continue.
“It is moving very slowly,” Gentiloni told Bloomberg when asked about the talks. “Of course, part of the reason why we are meeting here in the G-20 is to resolve this issue. This is an open issue.”
Yellen is among a number of G-20 policymakers who are hoping the Zambia deal will serve as a template for similar agreements between creditors and other countries, including Ghana, Ethiopia and Sri Lanka.
China, the developing world’s biggest official creditor, has been reluctant to participate in multilateral agreements amid divided views over specific debt restructuring measures.
“We have seen a growing awareness of the debt problem, and the risk that it poses not only to the global economy and the financial system but particularly to dozens of countries that are maybe one step away from defaulting,” said United Nations Development Program Administrator Achim Steiner. But there’s a “very slow pace of actually addressing this problem,” he said.
Speaking on Bloomberg TV, Steiner also said “most of the world’s debt is held by private creditors. They are still reluctant to be part of a debt solution.” They need “stronger guarantees, more certainty” from official creditors, he said.
Yellen Meets India’s Sitharaman to Deepen Economic Partnership (9:40 a.m.)
US Treasury Secretary Janet Yellen used a meeting Monday with Indian Finance Minister Nirmala Sitharaman to declare their two countries were “among the closest partners in the world.”
The bilateral sit-down is the latest in a series of engagements between the two nations. Prime Minister Narendra Modi’s last month conducted a state visit to Washington, including his second address to the US Congress. Yellen also has singled out India in her “friend-shoring” push to revamp global supply chains in a way that reduces US dependence on China.
Yellen’s visit marks her third trip to India as Treasury secretary.
“Today’s discussions will highlight the commitment of India and the United States to activate and further the G-20 agenda, including addressing critical global issues such as strengthening the multilateral development banks and taking coordinated climate action,” Sitharaman said in remarks preceding the bilateral session.
India, Indonesia Plan Local Currency Trade, Fast Payments (8:40 a.m.)
Indonesia and India are planning to settle bilateral transactions in local currencies and link up their fast payments systems to spur cross-border fund transfers, according to a senior Indian government official.
India’s Sitharaman and her Indonesian counterpart Sri Mulyani Indrawati discussed the proposals ahead of meetings among the G-20 countries in India, said the official who asked not to be identified as the plans are not public.
G-7 Continues Russian Asset Freeze, Japan Finance Minister Says (2:10 p.m. Sunday)
The Group of Seven nations have confirmed the continuation of a Russian asset freeze, Japan’s Finance Minister Shunichi Suzuki told reporters after a meeting in India Sunday. Japan earlier hosted the G-7 meeting in India, which Ukraine Finance Minister Sergii Marchenko also attended virtually.
On multilateral development bank reform, G-7 countries reiterated the importance of providing targeted support to leverage limited concessional financial resources and mobilizing private funds, Suzuki said. The group also welcomed an OECD international taxation package, part of a broader move to revamp global corporate levies.
War, Debt Distress, Inflation: G-20 Finance Chiefs Spar in India
There was no discussion of exchange rates at the meeting, Suzuki said.
Bank of Japan Governor Kazuo Ueda told reporters after the same meeting that the G-7 members shared that the global economy isn’t slowing as much as expected although uncertainty remains high going forward.
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