At the conference, US Treasury Secretary Janet Yellen is expected to urge her G20 counterparts to work together and find solutions to secure the necessary resources, to help developing countries recover from the COVID-19 pandemic.
The G20 meeting comes as the number of Omicron variant infections is declining in developed countries, but continues to increase in developing countries. The conference focused on discussing a series of current outstanding issues, such as inflation, normalisation of policies and digital transformation, in order to support member countries in economic recovery, after two years of many crises from the COVID-19 pandemic. In addition, the conference participants also discussed the development and stability of the global financial market.
One of the priorities of the US in this G20 meeting, is to urge countries in the group to make policy adjustments, to suit the circumstances of each developing country, in order to ensure a full recovery, while closing the gap in access to a COVID-19 vaccine for the poorest countries.
These adjustments will include supporting the efforts of the World Bank (WB), International Monetary Fund (IMF), World Health Organisation (WHO) and World Trade Organisation (WTO), in clearing "bottlenecks" in the process of deploying vaccines, treatment and diagnostic measures for COVID-19.
The US also wants G20 countries to support a proposal to create a global fund located at the World Bank, to invest in pandemic prevention and response, at an estimated cost of 75 billion USD.
Developing countries are facing increased financial risks, due to the impact of the COVID-19 pandemic and non-transparent debts. In "World Development Report 2022: Financing for Equity Recovery", the World Bank warned that risks may be hidden, due to the balance of income and expenditure of households, businesses, banks and Governments, having a close relationship with each other. The international financial institution noted that high levels of bad and latent debt, are effecting access to financing for low-income households and small businesses.
According to World Bank President David Malpass, the risk for developing countries is an inflation crisis and high interest rates will spread due to financial instability.
A "cloudy shadow" covers the business and financial sectors in many developing countries, when 46% of businesses surveyed in these countries are likely to fall into arrears. Non-payments can skyrocket, and private debt can quickly turn into public debt, as governments roll out bailouts.
Faced with this situation, the World Bank recommends that developing countries proactively manage bad debts, improve bankruptcy mechanisms, and create favourable conditions for reconciliation, without court arbitration, especially for small businesses, while promoting debt forgiveness to help reduce private debt.
As tightening global financial conditions and volatile domestic debt markets, in many developing countries "squeeze" private investment and hamper recovery, the World Bank urges policymakers to focus on the needs for a healthier financial environment.
To help stabilize finances and reduce the impact of the pandemic, on investment and the job market, Malpass stressed, it is important for governments to make adjustments towards credit access, on a large scale and allocate capital in the direction of growth. This will allow small, dynamic companies and sectors with high growth potential, to increase investment and create jobs.
The difference in the speed of recovery from the pandemic globally has led observers to say that the G20 faces a difficult task in navigating policy. G20 policymakers should warn emerging countries to prepare for potential market effects from major economies, tightening monetary policy, in order to reduce vulnerabilities in the recovery process.
