GANDHINAGAR: The failure of the G20 to achieve a breakthrough on debt restructuring for vulnerable countries is a “grave concern”, the head of a United Nations agency said on Monday as the body seeks pauses in debt repayment for poor nations amid rising poverty.
The debt restructuring talks made little progress during the third finance meeting of the G20 countries in India, as the bloc was unable to overcome key differences and low attendance due to domestic issues adding to the roadblocks.
“I think the G20, so far, the finance ministers (and) central bank governors’ negotiations have not really been able to advance a breakthrough on this question of debt and debt restructuring,” Achim Steiner, administrator of the UN Development Programme, told Reuters in an interview. “That is obviously of grave concern.”
Though Zambia, locked in default for almost three years, struck a deal last month to restructure $6.3 billion in debt owed to governments abroad including China, many challenges remain.
World economy in a difficult place, but not destined to stay there, says World Bank chief
The UN Development Programme has urged global finance ministers to give poor countries debt repayment breaks, estimating the Covid-19 pandemic and subsequent surge in inflation and borrowing costs had pushed an extra 165 million people into poverty.
The jump meant more than 20pc of the world’s population — around 1.65 billion people — were now living on less than $3.65 a day and were struggling to put food on the table, according to the agency.
“So, either you evolve the Common Framework rapidly in order to allow it to be the vehicle, or you need to adjust other mechanisms,” Steiner said.
Common Framework is a platform set up by G20 during the pandemic to speed up debt resolution and simplify the process of getting overstretched countries back on their feet.
“So, there are certain elements of the international financial activity that are trying to increase their focus in terms of financing, but I think the bottom line is, as of 2023, July, the issue of debt restructuring is really not advancing at all on a scale that is called for and needed,” Steiner added.
The world economy is in a difficult place but it is not destined to stay there, World Bank President Ajay Banga said on Monday.
The World Bank last month cut its 2024 forecast for global economic growth to 2.4 per cent from 2.7pc earlier, citing global monetary tightening.
“The fact is that the world economy is in a difficult place. It has outperformed what everybody has thought but it won’t mean there won’t be more challenges,” Banga said on the sidelines of a G20 meeting in Gandhinagar.
“Forecast is not equal to destiny. We can change destiny, that’s what we should think of right now,” Banga said.
Indian Finance Minister Nirmala Sitharaman, chair and host of the G20 summit, told finance leaders of “the responsibility we have...to steer the global economy towards strong, sustainable, balanced and inclusive growth”.
Key on the two-day agenda will be “facilitating consensus to intractable issues associated with rising indebtedness”, Sitharaman said, speaking to reporters alongside US Treasury Secretary Janet Yellen.
Talks will also focus on “critical global issues such as strengthening the multilateral development banks and taking coordinated climate action”, Sitharaman added.
Yellen said: “The world is looking to the G20 to make progress on key challenges like climate change and pandemics as part of our work to strengthen the global economy.”
She also cited work to tackle debt distress among the world’s poorest countries, noting debt restructuring progress in Zambia, which she had discussed when visiting Beijing this month.
Published in Dawn, July 18th, 2023