INDIAN Prime Minister Narendra Modi faces a formidable task as he presides over the G20 summit in Delhi on 9-10 September, striving to broker consensus between the world’s largest developed and developing nations. The enormity of the challenge is underscored by the conspicuous absences of Vladimir Putin and Xi Jinping, symbolizing the rifts within the G20 and its waning relevance. Under the theme of “One Earth, One Family, One Future,” the G20’s ostensible unity belies the underlying conflicts and its struggle to retain relevance. The G20’s roots trace back to the late 1990s but flourished a decade later during the global financial crisis when both affluent and emerging economies collaborated to cushion the blow of the near-collapse of the global banking system.
However, today’s landscape is starkly different, highlighting the pressing need for effective diplomacy and cooperation among these influential nations to address the world’s most pressing challenges. Apparently, two key issues need immediate attention: climate change and sovereign debt restructuring. On both matters, despite intensified and marathon discussions in the last few years, the G20 countries have been unable to find amicable and practical solution. The world is witnessing mounting apprehension as the relentless surge in food and energy prices, exacerbated by the reverberations of the COVID-19 pandemic and the turmoil unleashed by the Ukraine conflict, drives several low and middle-income nations into a precarious quagmire of debt, casting a shadow over global growth prospects.
The grim reality is that more than half of the world’s low-income countries now teeter perilously close to, or are already mired in, debt distress—a distressing doubling of the numbers seen just six years ago in 2015. As the world looks to navigate these treacherous waters, the G20 assumes a pivotal role. As the international community grapples with these multifaceted challenges, the G20 bears the responsibility of charting a course forward. Addressing crucial issues such as climate change, pandemics and bolstering the prospects of developing nations must be central to its collective mission. The world looks to the G20 for leadership in shaping a more secure and prosperous global future.
The recent G20 gathering of finance ministers and central bankers convened in India on July 17-18 yielded underwhelming outcomes. A glaring shortcoming was the group’s inability to advance a comprehensive sovereign debt restructuring framework, leaving low-income and vulnerable middle-income nations, including Ghana, Ethiopia and Sri Lanka, in a precarious state. The absence of tangible progress perpetuates the ordeal of prolonged debt negotiations for these nations, exacerbating their economic woes. Meanwhile, China’s agenda prevailed, advocating for a predominantly case-specific approach to debt restructuring that conveniently aligns with its strategic objectives.
This disappointing outcome underscores the urgency for the international community to reassess its commitment to equitable global financial stability and explore more effective mechanisms to alleviate the burden of LVMICs. Optimism surged briefly with Zambia’s recent debt restructuring agreement and the establishment of the Global Sovereign Debt Roundtable (GSDR) by the International Monetary Fund (IMF) and World Bank (WB). These developments hinted at potential strides in formulating fresh sovereign debt restructuring principles. Nevertheless, it predominantly mirrors China’s inclination and falls short of being an optimal solution for Zambia, due to several inherent limitations.
The recent G20 summit wisely acknowledged the absence of a universal solution for sovereign debt restructuring, recognizing the necessity to tailor strategies to individual nations’ unique conditions. While this approach aligns with China’s preference for case-specific methods, China’s pivotal role was prominently highlighted during the April 2023 launch of the Global Sovereign Debt Roundtable at the IMF/WB Spring meetings. This groundbreaking initiative convened debtor nations alongside a diverse array of creditors, encompassing official bilateral entities, multilateral development banks, the IMF and private sector lenders. The Roundtable fosters dialogue that can substantially influence and facilitate forthcoming restructuring talks. Furthermore, the IMF/WB pledged enhanced transparency, expeditious information sharing and increased concessional financing, including grants, for low-income countries embarking on restructuring endeavours. This represents a cautious stride ahead, notably by engaging private sector creditors promptly and furnishing them with ample data. The Global Sovereign Debt Roundtable’s potential to enhance transparency regarding a debtor nation’s debt landscape holds promise. Nonetheless, this pertains to procedural matters and does not alleviate the more formidable challenge of reaching accord on the extent and conditions of debt relief, or the equitable allocation of responsibilities among diverse creditor groups.
At the same time, the G20 has witnessed a disconcerting uptick of nearly 7% in per capita emissions stemming from coal-fired power since 2015. Alarming trends include expansion of coal plants and per capita CO2 output which towers three-fold over the global average. This looming concern takes centre stage as the G20 convenes in India. Strikingly, up to seven G20 members—China, Brazil, India, Japan, South Korea, South Africa and the United States—have yet to formulate strategies for the gradual reduction of coal utilization, as per environmental advocate Ember, dedicated to advancing the global shift towards cleaner energy sources. G20 nations, responsible for 80% of global power sector emissions, witnessed per capita CO2 emissions from coal power reach 1.6 tons in the past year, up from 1.5 tons in 2015—substantially surpassing the global mean of 1.1 tons.
While China has pledged to curtail coal consumption, this endeavour is slated for the 2026-2030 planning period. Other mature economies should also follow suit and vigorously accelerate their renewable energy efforts to effectively phase out coal by 2030. At the previous G20 summit, member states failed to reach a consensus on bolstering their climate commitments. But this time, it has become imperative that the G20 summit now addresses these pivotal issues earnestly and formulate tangible measures to confront them. The ultimate measure of New Delhi’s G-20 presidency, concluding in December, hinges on the summit’s results this weekend. Its success will be determined by the summit’s ability to yield a joint statement that includes specific timelines for addressing these vital issues.
—The writer is political analyst, based in Karachi.
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