G20 finance ministers in a spot

The two-day G-20 finance ministers’ summit, which ended in Bali on Saturday, failed to issue a joint statement because there were serious differences of view among the members. Indonesia, which was the host, issued a statement on Sunday, which reflected the differences as well as the common senses. The statement issued by the Indonesian central bank, Bank of Indonesia, said, “Many members agreed that the recovery of the global economy has slowed and is facing a major setback as a result of Russia’s war against Ukraine, which was strongly condemned, and called for an end to the war.” It also identified the major problems facing the global economy: “Members noted that existing challenges have been exacerbated, including supply-demand mismatches, supply disruptions, and increased commodity and energy prices, which have added to rising inflationary pressures and contributed to the increasing risk of food insecurity.” And the statement went on to affirm: “Many members stand ready to take prompt collective actions on food security, including by working with other initiatives.”

The initiatives have not been spelled out. The suggestion made by Indian Finance Minister Nirmala Sitharaman that the government should be allowed to sell its public stocks to countries which need food grains was not taken up because it involved a nod from the World Trade Organisation (WTO), which does not allow subsidised public food stocks to be sold in global grain markets. US Treasury Secretary Janet Yellen was resistant to any idea of subsidies regime, while Indonesian Finance Minister Sri Mulyani Indrawati talked of the need to move from the production sector to the countries in need. But how this is to be done remains elusive. Is it then the case that the political differences among the G20 countries over the Russian war in Ukraine will affect the ability of the group to deal with the problems facing the global economy? It looks like that there is no consensus over the food insecurity problem. US’s Yellen said, “We must take action to address the short-term food insecurity crisis and, equally importantly, the longer-term drivers of food insecurity, including the nexus with climate change.” The belief is that the short-term food insecurity is caused by the Russian war, but the Western countries are in no hurry to lift the economic sanctions against Russia, including the movement of food grains and fertilisers. Yellen favoured fiscal support measures instead of regressive and blanket subsidies.

The G-20 finance ministers have also been engaged in taking some long-term measures like the setting up of Financial Intermediary Fund (FIF) to tackle responses to pandemics as developed by the Joint Finance-Health Task Force hosted by the World Bank. The Bank of Indonesia statement also welcomed the continued discussions on Central Bank Digital Currencies “as these may be designed to facilitate cross-border payments while preserving the stability of the international monetary and financial system.”

It is not surprising that G20 finance ministers had no problem in identifying the major issues confronting the global economy, but what they did not have are clear answers. It has become clear that the countries must work together to find solutions and implement them. Yellen has rightly pointed out that there is need for greater global coordination than creating global institutions. But the US and other developed countries are not willing to share either information or transfer funds to poor countries to fight the challenge of pandemic and that of food insecurity. Whatever the political differences, the major world powers must put aside differences to act together. But that is not yet happening. Perhaps the best way to do is allow international organisations linked to the United Nations to get things moving on the ground.