The gap between rich and poor is widening, worries the World Bank at the G20

July 18, 2023

The big moneymakers of the G20 attacked tax reform and multilateral donors on Tuesday, without much progress on debt restructuring, while the World Bank was alarmed at the widening gap between rich and poor countries.

Several economies remain in trouble after the double shock of the coronavirus pandemic and the consequences of Russia’s war in Ukraine which affects the prices of fuels and raw materials.

Climate change also worsens the situation of the poorest countries and those least able to overcome the situation.

The discussions of the G20, meeting in Gandhinagar, in the Indian state of Gujarat (west), intervene the day after the Russian refusal to extend an agreement authorizing the export of Ukrainian cereals by the Black Sea.

The United Nations, which was outraged, warned that millions of the world’s poorest people would “pay the price”.

“We live in complicated times; I must allude to the fact that Russia yesterday (Monday) withdrew from the Black Sea initiative and Ukraine – and we are here to discuss how to help vulnerable countries,” German Central Bank President Joachim Nagel told AFP.

The President of the World Bank, Ajay Banga, expressed alarm on Tuesday at a dangerous split in the economy, in the absence of progress in the fight against poverty.

“What keeps me awake at night is the mistrust that silently divides the North and the South of the planet at a time when we need to unite,” Banga told ministers during their talks. on international financial structures.

“The frustration of the countries of the South is understandable. In many ways, they are paying the price for our prosperity.”

“While they should be on the rise, they fear that the promised resources will be diverted to the benefit of the reconstruction of Ukraine,” he continued.

According to Mr Banga, “they feel that energy rules are not applied in a uniform way, which limits ambitions, and they fear that the reign of poverty will break a new generation”.

The World Bank is working to increase its lending capacity, including by raising hybrid capital from shareholders, but it said the future economy cannot be built on expansion at the expense of the environment.

“The truth is simple: we cannot endure another period of CO2-intensive emissions growth,” insisted Mr. Banga, an Indian-American who took up his post at the Bank last month, appointed by US President Joe Biden.

According to the United States, efforts to reform multilateral donors, such as the World Bank and regional institutions, could unlock $200 billion over the next decade.

Debt restructuring deals for low-income countries have been high on the agenda of the group of twenty major economies, but talks have made little progress, officials say.

China, the world’s second-largest economy and the biggest financial backer to several struggling, low-income countries in Asia and Africa, has so far opposed a common multilateral agreement on the issue.

For IMF Managing Director Kristalina Georgieva, the debt restructuring process “needs to be faster and more efficient”, and the costs of the delay in reaching an agreement weigh above all on the borrowing countries and their populations “the least able to bear this burden”.

More than half of low-income countries are in or near debt distress, twice as many as in 2015, according to US Treasury Secretary Janet Yellen.

Finance ministers from neighbors and rivals India and China met early on Tuesday and discussed “their economies, inflation, trade and recognized the importance of a good business environment”, according to the Indian Ministry of Finance.

G20 discussions also focused on reforming multilateral development banks, regulating cryptocurrencies and facilitating access to finance to mitigate and adapt to the impact of climate change.

Last week, 138 countries agreed on a first step to distribute tax revenues from multinationals more fairly.