Modi calls for World Bank reform at G-20 finance meet

BENGALURU - Indian Prime Minister Narendra Modi added his voice on Friday to calls for reform of global lenders such as the World Bank, as Group of 20 finance ministers and central bank heads met.

The talks in Bengaluru focused on the continuing damaging effects of the Covid-19 pandemic and the Ukraine war, as well as debt relief for poorer nations reeling from high food and fuel prices.

“Trust in international financial institutions has eroded. This is partly because they have been slow to reform themselves,” Mr Modi said by video link as the two-day gathering began.

“We need to collectively work to strengthen multilateral development banks for meeting global challenges like climate change and high debt levels.”

The remarks echoed calls by others for the World Bank to boost lending and widen its remit beyond tackling poverty, though this has raised concerns that it could lose its top-notch credit rating.

US Treasury Secretary Janet Yellen said on Thursday in Bengaluru that it was “critical that they integrate work on global challenges into their core mission to sustain progress on these priorities”. 

World Bank chief David Malpass in February said he was stepping down in June, a year early. 

He had drawn fire for refusing multiple times to say if he believed man-made emissions contributed to global warming.

On Thursday, Washington nominated Indian-American former Mastercard chief executive Ajay Banga as his successor, drawing criticism over his corporate background.

“We don’t need another World Bank president who will further corporate interests like fossil fuel and industrial agriculture,” said environmental group Friends of the Earth.

German Finance Minister Christian Lindner, however, welcomed the proposal, saying Mr Banga’s background “suggests he can help cooperation between developed industrial nations and developing nations”. His French counterpart Bruno Le Maire called Mr Banga “a very good candidate”.

Discord

It was unclear if delegates in Bengaluru would manage to agree on a joint statement, in particular due to differences over the Ukraine war, as has happened at similar gatherings in the past.

New Delhi has maintained a neutral stance on the conflict, vastly increasing its purchases of cheaper Russian oil. Russia calls its actions in Ukraine a “special military operation”.

Dr Yellen said the communique was still under discussion, and she hoped to see a strong condemnation of Russia’s invasion and the damage it has caused Ukraine and the global economy.

Mr Lindner and Mr Le Maire said Germany and France wanted no weakening of the language used in a leaders’ declaration in Indonesia in November that said “most members strongly condemn the war”.

“For a year we have been witnesses of this awful war in Ukraine started by Russia. And especially on a day like this, and at an occasion such as a G-20 event, we need absolute clarity,” Mr Lindner said.

Hosting a raft of G-20 meetings during its presidency in 2023 puts India in an awkward position, as it has refused to condemn the invasion of Ukraine by its biggest arms supplier Russia.

The G-20 meeting comes amid signs that the global outlook has improved since the last summit in October, when a number of economies were teetering on the brink of recession amid energy and food price spikes caused by the war.

Dr Yellen highlighted the improvement, saying the global economy “is in a better place today than many predicted just a few months ago”.

The International Monetary Fund said ahead of the meeting that around 15 per cent of low-income countries were in debt distress and an additional 45 per cent were at high risk.

Mr Lindner echoed calls by Dr Yellen that China needed to “take responsibility” in restructuring poor nations’ debts, and that development banks should not have to take a “haircut” on their loans as demanded by Beijing.

The IMF said it was convening in Bengaluru a new Global Sovereign Debt Roundtable to “pave the way for creditors, both public and private, and debtor countries to work together”.

The G-20’s Common Framework for Debt Treatments has so far had limited success, largely on account of disagreements between China and other large creditor countries.

Discussions around green industry financing will be in focus after the European Commission laid out its Green Deal Industrial Plan in February – a move seen as countering the US Inflation Reduction Act.

Global tax reform could emerge as another point of conflict as plans for a global digital tax remain stalled in the absence of consensus between European nations and the US.

The IMF has forecast global gross domestic product growth for 2023 at 2.9 per cent, up from a 2.7 per cent forecast in October, but still well below the 3.4 per cent achieved in 2022.

Dr Yellen attributed the improvement in part to cooperation among G-20 central banks and governments over the past year in taking strong action to quell inflation, even at the expense of growth.

Inflation in the US and other countries has eased alongside lower energy prices, but Dr Yellen said such efforts have to continue and more work was needed to mitigate spillovers from the war, including easing food shortages and holding down energy prices and Russian revenues. AFP, REUTERS