– V.Srinivas IAS –
– G 20 A Decade in Multilateralism – Part 5 –
The G20 had become an integral part of the overall framework of international governance, as a Leader-led and informal group and the premier forum for international economic cooperation, bringing together major economies on an equal footing. The Los Cabos Summit of 2012 of the G20 was held amidst political impasse in dealing with large imbalances in the United States and Japan. The economic activity in the major emerging market economies had decelerated on the back of spillovers from advanced economies. The outlook for growth remained weak with huge downside risks. The euro area crisis required timely and resolute policy implementation. Financial conditions remained fragile.
The IMF said that risks to global growth remained on the downside, although there was no possibility of a sharp global slowdown. The risks were due to fragile financial systems, high public deficits and debt. The other key risk was a possibility of high oil prices. The IMF held that the euro area must achieve a resolution to the European economic crisis through fiscal consolidation and must adhere to targets laid down in the adjustment programs. The advanced economies faced an urgent need to set out a credible path of fiscal consolidation, while the emerging market economies faced a challenge of slowing growth amid a deteriorating external environment and volatile capital flows. The IMF held that collective action alone can help ensure a return to strong, sustainable and balanced growth.
The Leaders of the G20 agreed that they would do everything necessary to strengthen the overall health and growth of the world economy. Their focus was to rebuild the confidence in global financial markets. They felt that the reduction in global imbalances had not been sufficient, and the policy commitments for fiscal tightening in the United States, Japan and Europe remained critical to reduce risks and secure a durable and strong recovery. Despite the immense challenges faced domestically, the G20 leaders agreed that multilateralism is of greater importance in 2012 and remained the best bet to resolve the global economy’s difficulties.
The European crisis necessitated stronger supervision and direct bank recapitalization. Public finances were to be brought back to a sustainable path. The G20 agreed to move rapidly to a more market determined exchange rate system and exchange rate flexibility and avoid persistent exchange rate misalignments. The enormous focus on exchange rate misalignment was to bring greater flexibility in the renminbi. The G20 also pledged additional resources to the IMF for crisis resolution – an amount of US $ 461 billion pledges were received and US $ 286 billion borrowing agreements were finalized. The G20 also pledged to move faster on the financial sector regulation agenda. They also agreed for faster implementation of the Basel II, 2.5 and III measures and endorsed the charter for the Regulatory Oversight Committee.
In the backdrop of the Global Economic Crisis and the European Crisis, the G20’s focus was on enhanced surveillance of the world economy through the IMF and stronger financial sector regulation through the Financial Stability Board. The Surveillance Framework was strengthened through the Integrated Surveillance Decision and Mutual Assessment Framework. The Financial Stability Board started publication of an updated list of systemically important banks, and the framework for dealing with systemically important domestic banks. The G-SIFI supervision was intensified and greater transparency of financial institutions encouraged.
Further the G20 promoted Sustainable Development Policies and incorporated green growth into their agenda. Public financing of infrastructure remained critical for sustained economic growth and the Multilateral Development Banks were encouraged for higher infrastructure financing. Creating quality jobs and reducing employment was at the heart of the macroeconomic policy agenda. The G20 Taskforce on Employment continued its work. In this backdrop, the G20 adopted the Los Cabos Growth and Jobs Action Plan. The social partners of the G20, the Business 20 (B20) and Labor 20 (L20) continued to contribute to the G20 agenda in terms of recommending sustainable social protection floors, expand economic opportunities for women and gender equality.
The G20 placed considerable emphasis on enhancing food security and addressing commodity price volatility. Maintaining stability in commodity markets was an important factor in global economic recovery. The G20 stressed on the importance of well-functioning and transparent commodities markets and reduced excessive price volatility to achieve food security and strong growth.
The G20 resolved to phase out medium term inefficient fossil fuel subsidies that encouraged wasteful consumption. A G20 Climate Finance Study Group was constituted to effectively mobilize resources for climate finance.
The road from Los Cabos, Mexico in 2012led to Saint Petersburg, Russian Federation in 2013 and then to Brisbane, Australia in 2014.
G 20 A decade in multilateralism
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About the author
V.Srinivas IAS
Senior Bureaucrats and Author
V.Srinivas is an IAS officer of 1989 batch, currently posted as Chairman Board of Revenue for Rajasthan and Chairman Rajasthan Tax Board.
He has served as Advisor to Executive Director (India) in the IMF, Private Secretary to Finance Minister & External Affairs Minister Government of India and Planning & Finance Secretary Rajasthan.
Disclaimer : The views expressed by the author in this feature are entirely his own and do not necessarily reflect the views of INVC NEWS.
