G20: On climate, debt and digital, Bank and Fund pledge to work together

The IMF and World Bank have pledged to work together to address major global challenges

In the run-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, 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.

A security personnel seen along with the sniffer dog outside Bharat Mandapam ahead of G20 Summit at Pragati Maidan, in New Delhi. (Hindustan Times)

In a joint statement on Wednesday, IMF’s managing director Kristalina Georgieva and World Bank’s president Ajay Banga said that the global economic growth has slowed, with the “medium term outlook at its weakest in three decades”.

They added that progress in poverty reduction “has come to a halt”; conflict and fragility have risen; the world confronts geoeconomic fragmentation, extreme natural disasters exacerbated by climate change, and rising public debt; and there are new opportunities and challenges posed by “rapid digitalization”.

Georgieva and Banga, who will both be present at the G20 summit in Delhi, said that Bretton Woods Institutions - the term used to refer to the Bank and Fund since they were conceived in New Hampshire’s Bretton Woods almost eight decades ago — were committed to addressing these challenges, which were beyond the capabilities of a single country to address.

This enhanced collaboration will take place in three areas, all of which will be discussed in different ways at the G20 summit and are areas where India has articulated a strong position and sought to build a global consensus.

Enhanced climate collaboration

The first is climate. Terming climate change a “threat to global peace, security, economic stability and development”, IMF’s MD and the Bank’s president said that their institutions, together, in a coordinated manner, will provide help to all countries to integrate their “climate and development goals”.

Pointing out that the World Bank’s core mandate now includes climate — this is among the recommendations of the evolution road map endorsed by the Bank’s development committee as well as a part of the recommendations of the G20 expert group on MDBs set up under India’s presidency — Georgieva and Banga said that the Bank will build on its ongoing multiyear engagement on climate action and development. The Bank provides policy advice; it supports policy reforms through developing policy financing; and it provides financing for specific sectoral investments. This is built on on its Climate Change Action Plan, the Country Climate and Development Reports (CCDRs), and extensive country-level policy work. As a part of its country consultations and evaluations, the Fund has adopted a new climate strategy that includes coverage of macro climate issues. It also provides long term finance to vulnerable countries.

“We will formalise the regular meetings of the new Bank-Fund Climate Advisory Group, tasked with ensuring coordination of our climate related work streams. The group will meet every two months to discuss global and country level engagements, including the results of CCDRs, country level climate analytical work, and the pipeline of key projects and policy-based lending. We will also incorporate climate considerations in our ongoing work on debt sustainability, including through the revised joint Low Income Country Debt Sustainability Framework,” the IMF and Bank pledged.

Debt management

The second area is debt where “elevated

debt vulnerabilities” have made intensified collaboration more urgent.

On this, Georgieva and Banga said they will work together to “help prevent further build-up of debt vulnerabilities, assisting countries to strengthen debt management and transparency and public finances, while improving the joint Low Income Country Debt Sustainability Framework to better account for current challenges”. They also committed to deepening support to creditors and debtors engaged in debt restructuring, building on the work done at the Global Sovereign Debt Roundtable.

India is a leader of the roundtable and debt issues are expected to figure prominently at G20. HT reported on Thursday that there has been progress on management of debt vulnerabilities in four cases — Gambia, Ethiopia, Ghana and Sri Lanka — that will be unveiled during the summit.

Digital transformation, new technologies

The third area of greater Bank-Fund collaboration will be the digital transition, which Georgieva and Banga termed as the “forefront of development” that provides a unique opportunity for countries to accelerate economic growth and connect citizens to services and jobs. But they said, in 2022, nearly three billion people remained offline, with wide asymmetries in use between and within countries.

In this domain, the Bank worked with governments to address regulatory and infrastructure concerns to digital inclusion and transformation, promote financial inclusion and low cost payment systems, and expand digitalisation of government services and operations. The Fund supported digital transformation in the financial sector, and the wider use of new fin tech while maintaining integrity of the financial system.

“We will step up our joint work to help countries increase the effectiveness of revenue collection and expenditure systems in governments and reap the benefit 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,” the IMF and Bank’s leaders said.

This is yet another domain which will play out in the G20 discussions where India has both positioned itself as a leader in the use of digital public infrastructure to enable financial inclusion and pushed for regulation of crypto currency, both of which speak to the direct concerns of the Bretton Woods Institutions.