G7 finance chiefs to discuss Ukraine aid, debt and tax

G7 finance chiefs are set to discuss Sunday aid to war-stricken Ukraine, debt distress faced by struggling economies, bank reform and a global tax deal, alongside wider G20 meetings in India.

A key focus of the talks, which will include US Treasury Secretary Janet Yellen, will be supporting multilateral development lenders such as the World Bank to better tackle challenges like climate change and poverty, US officials said.

“With over half of all low-income countries at high risk of or in debt distress, it is critical that we take collective action to help put them — and by extension the global economy — on a surer footing”, the US Department of the Treasury said in a statement ahead of the meeting in Gandhinagar.

On Wednesday, the Group of Seven — Britain, France, Germany, Italy, Canada, Japan and the United States — promised at a summit in Lithuania to support Ukraine for as long as it takes to defeat Russia’s invasion.

Any discussion on Ukraine is awkward for host India, which has not condemned Russia’s invasion, but is also part of the Quad grouping alongside Australia, the United States and Japan.

G7 meetings come ahead of a gathering of G20 finance chiefs and central bank heads on Monday and Tuesday also in Gandhinagar, with World Bank chief Ajay Banga warning of a “deep mistrust… quietly pulling the Global North and South apart at a time when we need to be uniting”.

The climate change crisis, post-pandemic recovery efforts, the war in Ukraine and a lack of progress in the fight against poverty were creating divisions, he said.

– ‘Prison of poverty’ –

“The Global South’s frustration is understandable,” Banga said in an op-ed released by the bank ahead of the meeting.

“In many ways they are paying the price for the prosperity of others. When they should be ascendant, they’re concerned promised resources will be diverted to Ukraine’s reconstruction; they feel aspirations are being constrained because energy rules aren’t applied universally, and they’re worried a burgeoning generation will be locked into a prison of poverty.”

The International Monetary Fund said that finding common efforts to tackle the weak global economy will be crucial.

“The world will be looking for joint action to address rising economic fragmentation, slowing growth, and high inflation,” the IMF said in a statement last week.

The G20, chaired and hosted by India, will also discuss cryptocurrency regulations, as well as making access to financing to mitigate and adapt to the impacts of climate change easier for developing nations.

“In the Global North, climate change means emissions reductions,” added Banga, the World Bank chief.

“But in the Global South, it is a matter of survival, because hurricanes are stronger, heat-resistant seeds are in short supply, drought is destroying farms and towns, and floods are washing away decades of progress.”

A newly agreed first step on a fairer distribution of tax revenues from multinational firms reached by 138 countries on Wednesday is also set to be delivered during the G20 talks.

The Organisation for Economic Co-operation and Development, which hosted talks to reach a first draft of a multilateral convention, said it permits moving forward with a “historic” reform of the international tax system. (BSS/AFP)