WASHINGTON: In the run-up to the G20 Summit next month, finance leaders from the group’s member nations held a conference in Washington this week to discuss key economic issues and risk factors that are affecting the international monetary system and the stability of the global economy.
Food security, rising energy prices, high inflation, cross-border payment systems, financial risks, cryptocurrency and cyber resilience were among the key topics discussed by finance ministers and governors of central banks during the two-day event on Oct. 12 and 13.
Indonesian Minister of Finance Sri Mulyani Indrawati, whose country currently holds the presidency of the G20, said during the conference that the recent tightening of monetary policies and raising of interest rates by advanced and emerging countries has resulted in economic risks across the world.
She added that the global economic situation has become more challenging as nations grapple with issues such as rising inflation, food and energy insecurity, weak growth and geopolitical fragmentation.
“It’s not an exaggeration to say that the world is in danger,” she said.
Indrawati blamed the COVID-19 pandemic and the war in Ukraine for a “reshaping of the global energy market” that has resulted in “energy security concerns,” along with supply shortages and price increases that have effected most countries.
The financial leaders of the G20 reviewed key economic reports that will be discussed during the main G20 summit scheduled to take place in Bali, Indonesia, on Nov. 15 and 16. They also talked about climate-related economic risks and the effects of the pandemic on the financial sector.
One of the key objectives of the conference was to discuss a report and recommendations, published in July, that followed an independent review of Multilateral Development Banks’ Capital Adequacy Frameworks that was launched last year by G20 finance leaders.
MDBs are international and regional monetary institutions, such as the World Bank and the Islamic Development Bank, set up by sovereign states to provide loans and grants to developing and less-wealthy countries. Capital Adequacy Frameworks are designed to enhance the financial stability of these institutions and promote creative means of ensuring capital is available to help developing countries to promote growth and economic and social stability.
Delegates in Washington discussed whether there is now an over-reliance on loans and aid from such banks.
“We believe the Capital Adequacy Framework is the right solution that can help optimize the MDBs’ balance sheet, whether you are going to talk about risk appetite (or) creative financing,” said Indrawati.
She and other financial leaders stressed their support for the commitment of MDBs to global development, especially in developing countries that face increased financial risks, especially during global crises such as the pandemic.
Delegates highlighted the war in Ukraine as one of the main reasons for growing levels of food insecurity and a nutritional crisis affecting many developing nations. Indrawati said the conflict has disrupted supply chains around the world and caused energy prices to rise sharply.
Membership of the G20 comprises the world’s largest developed and emerging economies. Together they represent more than 80 percent of global gross domestic product, 75 percent of international trade and 60 percent of the world’s population.
The members of the group are: Argentina, Australia, Brazil, Canada, China, France, Germany, India, Indonesia, Italy, Japan, Republic of Korea, Mexico, Russia, Saudi Arabia, South Africa, Turkey, the UK and the US. The EU and Spain participate as permanent guests.
Indonesia is the largest Muslim country in the world, with a population of more than 230 million people, and considered a key global and regional economic powerhouse.