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WORLD

G-20 Finance Chiefs to Tackle Global Economic Threats

February 22, 2023

BENGALURU, India — Top financial leaders from the Group of 20 leading economies are gathering in the south Indian technology hub of Bengaluru this week to tackle myriad challenges to global growth and stability, including stubbornly high inflation and surging debt.

India is hosting the G-20 financial conclave for the first time in 20 years. Later in the year it will convene its first summit of G-20 economies. The meetings offer the world’s second most populous country a chance to showcase its ascent as an economic power and its status as a champion of developing nations.

This week’s gathering of finance ministers and central bank governors takes place just a year after Russia invaded Ukraine, setting off a cascade of shocks to the world economy, chief among them decades-high inflation. U.S. Treasury Secretary Janet Yellen is expected to address the global economic impacts of the war while at the G-20 meetings.

India is among the countries treading lightly between the Western nations and Russia, eager to claim more global sway but wary of becoming embroiled in antagonisms as its economy benefits from purchases of discounted Russian crude oil.

“India has a growing leadership role globally,” Information Minister Anurag Thakur, said Wednesday, reiterating Indian Prime Minister Narendra Modi’s stance that “today’s era is not of war. Dialogues and discussions are the only way forward.”

As host of more than 200 G-20 meetings in 28 cities leading up to the summit in November, Modi is expected to use that role to burnish India’s stature as a leader in fighting climate change and to act as a bridge between the interests of industrialized nations and developing ones.

“We don’t have the resources that developed countries have but within minimum resources we have also achieved a lot in sectors such as space and renewable energies such as green hydrogen,” Thakur said.

It’s an urgent priority, given the growing importance of emerging economies to global growth: the International Monetary Fund estimates that India and China alone will contribute more than half of global economic growth this year, with other Asian countries contributing another quarter of that expansion with annual growth rates of 6% to 7%.

India’s economy is forecast to expand at a 6.1% annual rate this year after growing 6.8% last year, the IMF said in a report issued Monday.

“The tough conditions at the macroeconomic level have somewhat eased but inflation rates are still high. In this situation coordination among major economies is vital,” Ajay Seth, a senior Finance Ministry official, told reporters Tuesday in Bengaluru.

Bengaluru is India’s start-up and technology powerhouse. First recognized as an outsourcing hub, it’s now known for its entrepreneurs and information technology companies. But the city is plagued by poor planning. Last year, it experienced extreme flooding, partly due to global warming, that caused an estimated $30 million in damage.

Improving urban infrastructure will figure in this week’s talks, the first of four G-20 finance minister meetings due to take place this year in India.

The G-20 includes the world’s largest economies and has a rolling presidency. Last year, Indonesia was host and next year Brazil will take over, followed by South Africa in 2025.

In countries like India, it’s seen as a counterbalance to gatherings of wealthier economies such as the Group of Seven.

At the meetings in Bengaluru, officials will discuss a range of issues related to climate finance, seeking consensus on regulating digital currencies, global tax issues and other financial priorities.

Yellen and other officials have indicated they will also be discussing risks of heavy debt burdens for many countries after costly efforts to cushion the worst impacts of the COVID-19 pandemic. Those woes have deepened as countries’ import bills surged due to sustained higher prices for food, oil and fertilizers and weakening currencies.

Yellen visited Zambia in January, in part to discuss the African country’s $6 billion debt to China, its biggest creditor. Zambia became the site of Africa’s first coronavirus pandemic-era sovereign nation to default when it failed to make a $42.5 million bond payment in November 2020.

But a slew of other countries have seen their finances deteriorate in the past year, including India’s neighbor Sri Lanka and others in Asia.

“Several countries are facing huge debt problems. Finding lasting solutions for them will feature prominently in the discussions,” said Seth, the Finance Ministry official.

A senior Treasury official, who spoke on condition of anonymity to preview Yellen’s travel plans, said she intends to urge fellow G-20 countries to reduce carbon emissions and invest more in developing renewable energy, infrastructure and agriculture.

At a U.N. climate conference last November, India — currently the world’s third largest emitter of greenhouse gases — proposed a phaseout of all fossil fuels and repeatedly emphasized the need to revamp global climate finance.

Those longstanding G-20 priorities, which also include building stronger public health systems, expanding use of sustainable energy and helping countries improve productivity often tend to be overshadowed by immediate concerns such as stalling global growth, debt crises and conflicts like the war in Ukraine.

Shocks from the war and from the pandemic have amplified disruptions to energy supplies, shipping and food security, complicating efforts to stabilize the world economy after the upheavals of the pandemic.

Another priority in Bengaluru will be coordination on monetary policy as central banks assess whether to keep raising interest rates or to dial back on efforts to cool inflation.

 

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