G20: Bank and Fund promise to collaborate on climate, debt, and digital issues

The International Monetary Fund and World Bank have warned that the world faces major challenges and shocks and pledged to work together to deliver on climate, debt, and digitisation in a structured way, based on their respective strengths, in the lead-up to the G20 Leaders’ Summit in New Delhi this weekend, where the reform and strengthening of multilateral development banks is among the top agenda items.

IMF managing director Kristalina Georgieva and World Bank president Ajay Banga stated in a joint statement on Wednesday that the global economy has slowed down, with the “medium term outlook at its weakest in three decades.”

The world now faces geoeconomic fragmentation, extreme natural disasters made worse by climate change, rising public debt, and new opportunities and challenges brought on by “rapid digitalization,” they continued, adding that progress in eradicating poverty “has come to a halt.”

Both Georgieva and Banga, who will be present at the G20 summit in Delhi, stated that the Bretton Woods Institutions, which have been referred to as the Bank and Fund since their conception in New Hampshire’s Bretton Woods nearly eight decades ago, are dedicated to addressing these challenges because they are too big for any one nation to handle alone.

The two institutional heads emphasized that although the Fund has the capacity to support macroeconomic and financial stability and advance economic circumstances favorable to development and sustainability, the Bank provides a variety of talents and expertise to sustainable growth and structural change. “We will closely coordinate our engagements at the international, regional, and national levels to ensure that our resources are used effectively and efficiently, motivated by a focus on results for our members.”
Three areas—where India has taken a strong stance and worked to forge a global consensus—will all be the subject of various discussions at the G20 summit as a result of this strengthened engagement.

Enhanced cooperation on climate

Climate is first. The MD of the IMF and the president of the Bank described climate change as a “threat to global peace, security, economic stability, and development,” and they both said that their organizations would work in unison to support all nations in integrating their “climate and development goals.”

Georgieva and Banga noted that the World Bank will build on its ongoing multiyear engagement on climate action and development, noting that this is one of the recommendations of the evolution road map endorsed by the Bank’s development committee as well as a component of the recommendations of the G20 expert group on MDBs set up under India’s presidency. The Bank offers policy guidance, develops policy financing to assist policy changes, and provides funding for particular sectoral initiatives. Its Country Climate and Development Reports (CCDRs), Climate Change Action Plan, and comprehensive country-level policy work serve as the foundation for this. The Fund has established a new climate strategy that covers macro climate problems as part of its national engagements and assessments. In addition, it offers fragile nations long-term financing.

The new Bank-Fund Climate Advisory Group, entrusted with maintaining coordination of our activity streams linked to climate change, will have official meetings on a regular basis. Every two months, the group will convene to examine global and national activities, including CCDR findings, national climate analysis, the status of important projects, and policy-based loans. The IMF and Bank promised that they will include climate issues in their continued work on debt sustainability, particularly via the updated joint Low Income Country Debt Sustainability Framework.

managing debt

Debt is the second sector, where it has “elevated

debt vulnerabilities” have increased the need of increased coordination.

With regard to this, Georgieva and Banga stated that they will collaborate in order to “help prevent further build-up of debt vulnerabilities, assist countries in strengthening debt management, transparency, and public finances, while improving the joint Low Income Country Debt Sustainability Framework to better account for current challenges.” Building on the work done at the Global Sovereign Debt Roundtable, they also pledged to intensifying assistance for creditors and debtors involved in debt restructuring.

The G20 is likely to have a lot of discussion on debt since India is one of the roundtable’s leaders. The management of debt vulnerabilities has advanced in four situations — Gambia, Ethiopia, Ghana, and Sri Lanka — that would be revealed during the summit, according to HT’s report on Thursday.

New technologies and the digital transformation

The digital shift, which Georgieva and Banga referred to as the “forefront of development” and which presents a special potential for nations to boost economic growth and link individuals to services and employment, will be the third area of increased Bank-Fund engagement. However, they claimed that in 2022, up to three billion people will still be offline, with significant disparities in use across and within nations.

The Bank collaborated with governments in this area to solve infrastructural and regulatory issues related to digital inclusion and transformation, advance financial inclusion and low-cost payment options, and increase the digitalization of government processes and services. The Fund encouraged greater use of innovative fintech while preserving the stability of the financial system. It also promoted the digital transformation of the financial industry.

The leaders of the IMF and the Bank stated, “We will step up our joint work to support countries in improving the efficiency of revenue collection and expenditure systems in governments and reaping the benefits of new digital technologies while mitigating the risks, including on ways to improve cross-border payments, support implementation of the G20 Roadmap to enhance cross-border payments, and ensure that payment innovations spur growth, poverty reduction, and job creation.

Another topic that will come up during the G20 talks is regulation of cryptocurrencies, which India has also pushed for. Both of these initiatives directly address the concerns of the Bretton Woods Institutions. India has established itself as a leader in the use of digital public infrastructure to enable financial inclusion.