India is all set to spur a new age of reforms in the World Bank, the International Monetary Fund (IMF), and other global financial institutions during its year of presidency of G20.
Guided by Prime Minister Narendra Modi’s assertion that “trust in international financial institutions has eroded, partly because the lenders were slow to reform themselves,” it is pushing for change.
Finance Minister Nirmala Sitharaman discussed India’s G20 Finance Track priorities, including strengthening multilateral development banks to better address global public goods and serve all clients, including middle-income countries, during a discussion with the outgoing World Bank President David Malpass.
The exchange was significant ahead of the Global Sovereign Debt Roundtable to be hosted by the World Bank, the Government of India, and the International Monetary Fund. Sitharaman made it clear that India will push for reforms in the multilateral institutions, including the International Monetary Fund and World Bank, during its G20 presidency to make them more attuned to the needs of the developing world.
“Institutions such as United Nations, World Bank and the International Monetary Fund (IMF) need to be urgently reformed as they no longer speak for countries whose issues have remained unattended to for decades,” she argued.
Though the G-20 Finance Ministers and Central Bank Governors’ meeting on February 24 and 25 was bogged down by differences over the Ukraine war, the issue of reforms in global lending institutions, and India’s stand, received considerable attention.
Key role of MDBs
The G20 Chair’s Summary and Outcome Document issued after the meeting noted the key role that Multilateral Development Banks (MDBs) play in development financing.
“While maintaining their focus on poverty reduction and all other Sustainable Development Goals (SDGs), we recognise the need for MDBs to evolve given the scope and complexity of trans-boundary challenges and the resultant increase in demand on their lending resources, knowledge support, and for catalysing private investment. We will work to strengthen MDBs towards this end,” the document said.
The G20 countries took note of the World Bank’s Roadmap for evolving the Bank’s mission, operational approach, and financial capacity within their country engagement model and called upon other MDBs to report on their efforts to address similar challenges.
Expert Group report
The grouping of the world’s leading economies looked forward to receiving the report of the Expert Group proposed by the G20 Indian presidency for deliberations on this issue in its third meeting in 2023.
Taking forward the mandate given by the G20 Leaders in Bali, the twoday Bengaluru meeting tasked the International Financial Architecture Working Group to work with the MDBs to develop a G20 Roadmap for implementing the recommendations of the G20 Independent Review of MDBs Capital Adequacy Frameworks (CAF) based on updates from MDBs in Spring 2023
The discussions during the two-day meeting were jointly steered by the Ministry of Finance and the Reserve Bank of India along with France and Korea, who are the co-chairs of the International Financial Architecture Working Group.
The G20 group reiterated its commitment to maintaining a strong and effective Global Financial Safety Net with a strong, quotabased, and adequately resourced IMF at its centre.
It also resolved to continue strengthening the long-term resilience of the international financial architecture by promoting sustainable capital flows and developing local currency capital markets.
The G20 Chair’s Summary
and Outcome Document looked forward to continued discussions with international organisations on the coherent implementation of international frameworks for the use of capital flow management measures, while being mindful of their original purpose.
“We will continue to monitor the dynamics of capital flows to harness their benefits and manage risks, including those arising from spillovers. We also look forward to discussions on the possible impact of climate change-related policies on capital flows,” it said.
Shared global challenges The meeting was spread over three sessions, covering issues such as strengthening multilateral development banks to address shared global challenges of the 21st century, financing for resilient, inclusive and sustainable ‘cities of tomorrow’, and leveraging Digital Public Infrastructure (DPI) for advancing financial inclusion and productivity gains.
The sessions also covered issues related to the global economy, global health, and international taxation. In a special message, UN Secretary General Antonio Guterres said India’s G20 presidency was “very important” and called the grouping’s Finance Ministers to be “bold” in their efforts to reform the multilateral development banks and in finding solutions to pressing debt challenges.