Miguel Pesce, Governor of the BCRA, took part in the G20 Finance Ministers and Central Bank Governors Meeting held both virtually and in person in Jakarta, Indonesia, on February 17 and 18.
During the first G20 Meeting of Finance Ministers under the presidency of Indonesia, the members discussed issues related to global economy and health, international financial architecture, financial regulation and inclusion, sustainable finance, infrastructure and international taxation. Deputy finance ministers and deputy central bank governors had previously held a meeting.
Ministers and central bank governors pointed out that the recovery of the global economy seemed to have slowed down because of the impact of the Omicron variant, and varied across countries due to the unequal distribution of vaccines and available policy action. In turn, global supply chain disruptions and increased energy prices have contributed to higher global inflation. In addition to macroeconomic and financial vulnerabilities, the authorities pointed to the risks posed to the international economy by rising geopolitical tensions and climate change.
The members have undertaken to continue using all available tools to mitigate the effects of the pandemic, especially on the most vulnerable sectors, as well as to advance the 2030 agenda for sustainable development. The members added that, as the recovery continues, any “exit policies” will be planned, calibrated and communicated to support the activity. This will include avoiding adverse “spillover effects” among countries, preserving fiscal sustainability, financial stability and price stability (in line with central bank mandates).
The G20 has also formed a finance and health task force to finance pandemic preparedness and response. The official communiqué states that the group will analyze alternatives for establishing a financial facility for this purpose.
Following the general allocation of special drawing rights (SDRs) agreed last year, the G20 now called on the IMF (in collaboration with the World Bank) to establish a resilience and sustainability fund, through which SDRs can be recirculated from countries that do not use them to others that have financial needs. The G20 called for the resilience and sustainability fund to be operational by October of this year. The group will also intensify work on the Common Framework for Debt Treatment beyond the Debt Service Suspension Initiative (DSSI) for low-income countries in the face of the pandemic in 2020 and 2021.
As regards financial sector issues, the G20 will continue assessing and monitoring the costs and benefits of innovations such as crypto assets. The group notes that, in the absence of effective regulation and supervision, these new markets could become a risk to global financial stability due to their scale, structural vulnerabilities and increasing interconnectedness with the traditional financial system.
In turn, the Governor of the BCRA highlighted the need to continue making progress in the monitoring of non-bank financial intermediaries, such as international investment funds. This is particularly relevant for developing countries given the pro-cyclical behavior of these participants and their relationship with the volatility of capital flows. Pesce welcomed the inclusion of this topic on the agenda, highlighting that it is necessary to extend micro and macroprudential analysis and regulation to these financial intermediaries, in view of their impact on emerging markets. Pesce also referred to the growing relevance of the sustainable finance agenda, stressing that the transition to a “greener” economy must be aligned with the economic and social development of middle- and low-income countries.
The next G20 Finance Ministers and Central Bank Governors Meeting will be held in April 2022.
