The new head of the World Bank has warned that growing divides between rich and poor nations risk deepening poverty in the developing world, at a meeting of G20 finance ministers in India.
Many countries are still recovering from the double blow of the coronavirus pandemic and fallout from Russia’s war in Ukraine – which hit global fuel and commodity prices.
Climate change, meanwhile, is most painfully affecting some of the poorest countries least able to cope.
Ajay Banga, president of the World Bank, said he feared a lack of progress was in danger of splitting the global economy, to the detriment of the world’s poorest.
“The thing that keeps me up at night is a mistrust that is quietly pulling the Global North and South apart at a time when we need to be uniting,” Banga told the two-day meeting of finance ministers and central bank chiefs in Gandhinagar, Gujarat state.
“The Global South’s frustration is understandable. In many ways they are paying the price for our prosperity,” said Indian-born Banga, a naturalised American citizen who took up the bank post last month after being nominated by United States President Joe Biden.
“When they should be ascendant, they’re concerned promised resources will be diverted to Ukraine’s reconstruction, they feel energy rules aren’t applied evenly, constraining ambition, and they’re worried the grip of poverty will pull down another generation.”
The World Bank said it is working to increase its financial capability – including by raising hybrid capital from shareholders – to spur growth and jobs, but said the future economy could not rely on expansion at the cost of the environment.
“The simple truth is: we cannot endure another period of emission-intensive growth,” Banga said.
‘Balanced and inclusive growth’
Indian Finance Minister Nirmala Sitharaman, chair and host of the get-together, launched talks on Monday by reminding leaders of their responsibility “to steer the global economy towards strong, sustainable, balanced and inclusive growth”.
Debt restructuring deals for low-income nations have been a key focus of The Group of 20 major economies, but officials suggest there has been little headway.
China, the world’s second-largest economy and a major lender to several stressed, low-income countries in Asia and Africa, has so far resisted any one-size-fits-all debt restructuring formula, officials said.
More than half of all low-income countries are near or in debt distress, double the amount in 2015, US Treasury Secretary Janet Yellen said.
Yellen on Sunday said a deal on Zambian debt had taken “too long to negotiate”, but added she hoped debt treatments for Ghana and Sri Lanka could be “finalised quickly”.
Finance ministers from regional rivals and neighbours India and China met early on Tuesday, without commenting to reporters.
The G20 talks have also focused on multilateral development banks’ reform, cryptocurrency regulations, and easier access to financing to mitigate and adapt to the effects of climate change.
A newly agreed first step on a fairer distribution of tax revenues from multinational firms – reached by 138 countries last week – is also set to be delivered.
Multinationals, especially tech firms, are currently able to shift profits easily to countries with low tax rates even though they carry out only a small part of their activities there.
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