G20 Finance Track

12 Aug 2023 5 mins Download PDF

G20 Finance Track

Why in the News?

The Union Finance Minister Nirmala Sitharaman asked the global community to coordinate on restructuring the debt of Vulnerable low-and middle-income countries in the G20 Finance Track Seminar.

G20 Finance Track:

1. One of the two tracks of the G20 Summit (the other being Sherpa Track) focuses on global macroeconomic issues such as,
   1. Monitoring of global economic risks
   2. Reforms for a more stable and resilient global financial architecture
   3. International taxation agenda
   4. Financing quality infrastructure
   5. Sustainable finance
   6. Financial inclusion
   7. Financial sector reforms
   8. Financing for future health emergencies and investments in pandemic prevention, preparedness and response.
2. It involves the meetings of Finance Ministers and Central Bank Governors, their Deputies and various working group meetings.
3. Key Achievements of the finance Track post-pandemic Includes:
   1. Debt service suspension initiative (DSSI)
      1. It was announced as part of “G20 Action Plan” to address the COVID-19 pandemic and the significant health, social and economic challenges faced by countries around the world.
      2. The initiative provides for a time-bound suspension of loan repayments (both principal and interest) for countries which places a request.
      3. Eligibility:
         1. 1. 1. 1. The initiative applies to 76 countries that are eligible to receive assistance from the World Bank's International Development Association &
                  2. to all nations defined as "least developed countries" by the United Nations
                  3. Countries should have current debt with IMF and the World Bank and without any history of arrears of payments.
            2. Common framework for debt treatments beyond DSSI
            3. G20 sustainable finance roadmap

1. 2. Two pillar solution to tax challenges arising from the digitalization of the economy

1. 3. G20 principles for quality infrastructure investment
   4. Financial intermediary fund (FIF) for pandemic PPR

Debt vulnerabilities of low-and Middle-income countries:

1. The debt vulnerabilities of low-and Middle-income countries have been on rise in the recent past.
2. The low-and Middle-income countries face the challenges of combination factors of conflict, weak governance, or commodity-dependence, that acts as drivers of rising debt.
3. Interest payments are forming an increasing proportion of government revenues.
4. Dependence on external debt dominated in foreign currency poses a risk of rise in domestic value of the country’s debt burden and interest payments in the cases of depreciating domestic currency.
5. What needs to done?
   1. Priority to identify and reduce debt-related vulnerabilities
   2. Focus on mobilizing domestic resources
   3. Improving debt transparency
   4. Strengthening debt management practices such as lowering the debt servicing cost, reducing economic vulnerability and enhancing public sector transparency and medium-term planning.
   5. Strengthen fiscal frameworks
   6. Improve the efficiency of public expenditures and public investment management
   7. Develop domestic financial systems

Source URL: Global community must collaborate to restructure debt: Finance Minister | Business News - The Indian Express