G20 nations close to sealing digital public infrastructure, debt, multilateral development banks, crypto pacts

Negotiators are also close to an agreement on managing debt vulnerabilities in Global South countries.

The G20 Summit under the Indian presidency will see leaders endorse close to 10 substantial deliverables on the finance track, including a financial inclusion action plan 2024-26 based on the Indian template of digital public infrastructure (DPI); a “risk-proof” global framework for crypto assets; a framework to reform, strengthen and restructure multilateral development banks (MDBs); a country-specific climate assessment and transition plan; and a greater push to meet sustainable development goals (SDGs), two persons familiar with negotiations said.

An armed security personnel stands guard near a G20 India summit logo installed along a street in New Delhi on September 6, 2023, ahead of its commencement.(AFP)

Nineteen of the 20 countries, barring China, are also close to an agreement on the management of debt vulnerabilities that have engulfed a range of countries in the Global South, the officials added.

G20 negotiators are also in the final lap of discussions on issues such as the implementation of two-pillar tax framework and capacity-building of countries to navigate it. But the finance track isn’t insulated from the geopolitical divide, where Moscow and Beijing have blocked language around the economic implications of the Ukraine war while G7 countries have pushed for it.

Steered by finance minister Nirmala Sitharaman, the G20 Finance Track has held 27 meetings, including four ministerial meetings, across 12 states and two Union territories, hosting over 3,000 delegates.

A person closely involved with the finance track discussions said that the first achievement of the Indian presidency revolves around DPI and financial inclusion, where all members of the group have agreed on a road map – the G20 Financial Inclusion Action Plan 2024-26. The overarching objectives for the period include supporting financial inclusion through policy analysis, recommendations and high-level principles, and by sharing experiences, examples and successful solutions.

G20 members have embraced the three-year mission based on the recognition that financial inclusion plays a crucial role in enabling progress towards achieving sustainable development goals (SDGs). “This is the legacy of India that will be carried on to other presidencies,” the person said, adding that members recognised the “significant role” that DPI played in “financial inclusion, sustainable development and eradication of poverty” in India.

The second area of convergence is around the regulation of cryptocurrency. G20 members initially had divergent views on crypto assets. But India, a second person familiar with the deliberations said, was able to convince counterparts of macroeconomic risks, especially after several vulnerabilities were exposed globally, including the collapse of the FTX, the second largest cryptocurrency exchange of the world, affecting over a million investors.

HT, on July 25, reported that a majority of G20 members were in sync with the view of India’s central bank that cryptocurrency could pose huge risks to the stability of the financial system. While the International Monetary Fund (IMF) highlighted macroeconomic risks, the Financial Stability Board (FSB) highlighted regulatory aspects. The “IMF-FSB Synthesis Paper” has now laid down a comprehensive road map. “Building blocks and road maps (on crypto asset regulation) has been almost arrived at, subject to the approval of leaders,” the first person said.

The third major achievement of the G20 finance track is arriving at a consensus on getting MDBs ready for the 21st century. The issue has been on the international agenda and been “randomly discussed” at various platforms for long, people cited above said. But India believes its presidency has been able to give it a definite agenda and shape. This is based on the work of an expert group led by former US treasury secretary Lawrence Summers and veteran Indian policymaker and 15th Finance Commission chair NK Singh. The group submitted its first report in Gandhinagar in July and will submit its second report in Marrakech in October.

“Members have agreed to shakeup MDBs to make them relevant for the 21st century. It will be up to individual MDBs to implement its recommendations in their respective banks,” the first person said. These recommendations strongly encapsulate the views of the Global South.

“There are some outstanding operational issues on this matter that are expected to be resolved between now and the Leaders’ Summit,” a second person said, adding that the implementation of the recommended capital adequacy framework could yield an additional lending headroom of up to $200 billion over the next decade. Besides suggesting ways to mobilise additional resources, the expert group has also recommended the expansion of the World Bank’s mandate to include dealing with climate, sustainable development goals and global public goods, while sticking to its dual mandate of eradicating extreme poverty and boosting shared prosperity.

According to the people cited above, the fourth achievement is “substantial and concrete progress” of financing of cities for tomorrow. MDBs and development finance institutions (DFIs) will identify some pilot cases and, based on the experience, this will be taken forward. G20 members have agreed to develop a compendium of financial models for future cities, besides having a framework for assessing and enhancing institutional capacity of urban administration, they said.

The fifth achievement is a broad consensus within the grouping, but with a striking yet unsurprising exception, China. At a time when the pandemic and the war have led to increased debt vulnerabilities across countries, people familiar with the talks said that the Indian presidency has been able to nudge the members to find a definite solution of this issue. “While a common framework for three countries have been readied, the debt problem of Sri Lanka has been tackled separately because it is not considered as a low income country (LIC),” the first person said.

The three LIC countries, which will see progress, are Gambia, Ethiopia and Ghana. “The debt relief mechanism is, however, tied with climate issues, something not liked by China as on today… G20 members may not yield to China’s position,” the second person said. China’s opposition also comes in the wake of what many consider to be Beijing’s predatory financing practices contributing to unsustainable debt burdens.

There is also an in-principle broad consensus around the issue of climate finance and enhancing the role of MDBs in this regard. While a tangible climate finance deal isn’t expected — COP has traditionally been the platform for these discussions rather than G20 — those familiar with the discussions said that the summit is likely to see important recommendations around scaling up balanced finance, risk sharing facilities and participation of private funds. “It also call for rapid deployment of low carbon technology,” the first person said.

The seventh major achievement has been towards achieving SDGs, where the world has seen a setback in recent years. India, those cited above said, has been able to emphasise the social aspect of economic development and bring in environmental issues. “Recommendations, subject to approval of the leaders, include adoption of environment and social projects, particularly related to education and health,” the first person said, adding that private finance in these areas have been proposed.

The eighth achievement revolves around G20 countries adopting a framework for country-specific assessment of macro impact of the climate crisis and the transition pathway rather than a “one size fits all” approach. The Summit is also likely to go beyond pricing mechanisms as the sole instrument to minimise carbon footprints to include non-pricing mechanisms. A related, but separate, issue pertains to setting up a multi-year G20 Technical Assistance Action Plan (TAAP) and the voluntary recommendations made to overcome data-related barriers to climate investments. Relevant jurisdictions can implement TAAP in line with their national circumstances.

G20 members have also agreed that transition should be inclusive, and the extensive use of fossil fuel should end through a cooperative but also a customised approach depending on specific circumstances of different countries. Initially, the text language proposed “Just Climate Transition” where “just” means “fair”. But with Saudi Arabia objecting to the term climate, the text now reads “Just Transition”.

The final achievement pertains to an assessment of macroeconomic consequences of food and energy insecurity. The people cited above referred to discussions among member countries on the geopolitical situation leading to the breakdown of global supply chains. “We discussed it comprehensively and agreed to pursue greater cooperation in financing LICs,” the first person said, adding that Russia was against including this in the text, “not even as a footnote”. “This may finally become the part of the text, with Russia’s dissent,” the second person said.

India took over the G20 presidency from Indonesia on December 1 for a one-year period. The G20 is the premier forum for international economic cooperation. Its members include Argentina, Australia, Brazil, Canada, China, France, Germany, India, Indonesia, Italy, Japan, South Korea, Mexico, Russia, Saudi Arabia, South Africa, Turkey, the UK, the US and the European Union. Spain is also invited to the group as a permanent guest. India has included Bangladesh, Egypt, Mauritius, the Netherlands, Nigeria, Oman, Singapore and the UAE as guest countries during its presidency.

Nilaya Varma, co-founder and CEO of consultancy firm Primus Partners, said India assumed the G20 Presidency at the right time when the world needed it most as a compassionate voice for poor nations, particularly the Global South. “India leads with example. Even before it assumed the leadership at G20, it provided Covid vaccines to the countries in need. It is extending help to support nations that became vulnerable due to the breakdown of the global supply chain.”