World’s most influential finance heads ponder how to revive growth

Finance chiefs from the world’s biggest economies are holding their first gathering of the year Thursday and Friday, with the pandemic, inflation and taxes set to dominate talks.

Discussions on capital flows, financial stability and sustainable finance are also on the agenda when central bank governors and finance ministers from the Group of 20 hold virtual and in-person meetings in Jakarta.

Many of the events will be behind closed doors, and much is likely to be discussed on the side, including surging oil prices and tensions with Russia over Ukraine. Since the communique scheduled to be issued Friday afternoon in Indonesia must be agreed on by all members, it’s likely to shun finger-pointing in favor of calls for cohesion around shared goals.

Here’s a guide to the talks Thursday and Friday:

Global Recovery

Top of mind will be navigating a slowing global economy that faces broad-based inflation risks and a pandemic now in its third year. When officials last met in October, price pressures were dubbed as “transitory.” Now investors are betting on the fastest pace of interest-rate hikes since 2010 across the world’s biggest developed markets.

Sill, the inflation outlook is far from uniform. While the Federal Reserve is raising rates, the People’s Bank of China is easing. The IMF three weeks ago cut its world economic growth forecast for 2022, citing weaker prospects for the U.S. and China, along with persistent inflation.

Officials are also expected to discuss Covid-19 assistance to lower-income countries and how to reduce the gap in access to vaccines, as well as hold talks around preparing for future pandemics.

What They Said in October

“Central banks are monitoring current price dynamics closely. They will act as needed to meet their mandates, including price stability, while looking through inflation pressures where they are transitory and remaining committed to clear communication of policy stances.”

— Communique from Finance Ministers and Central Bank Governors Meeting, Oct. 13, 2021

Tax

Officials will discuss the latest step for the ambitious G-20-backed plan to overhaul how countries tax multinational companies.

That agreement, reached last year, intends to halt efforts by big firms to shift profits into low-tax havens through a global minimum tax of 15% for multinationals. It also attempts to address the increasingly digital nature of international commerce by taxing companies, in part, on where they do business instead of where they book profits.

A U.S. official said this week that Treasury Secretary Janet Yellen would continue to express confidence that Congress will approve measures to implement the U.S. portion of the global minimum tax this year. No mention was made about the second portion of the agreement, which would reallocate taxing rights, a component that might face more opposition among U.S. lawmakers.

International Financial Architecture

This section of the meetings will analyze capital flows and threats to both macro-economic and financial stability, along with discussions on boosting financial resilience.

The International Monetary Fund and the World Bank have been warning about risks developing nations face from the spillover of imminent interest-rate increases in the U.S., and the slow progress of the Common Framework for Debt Treatments.

Both institutions have called for the G-20 to allow nations that apply for restructuring a standstill during negotiations. IMF Managing Director Kristalina Georgieva also has urged an expansion in the number of eligible nations. About 60% of low-income countries are at high risk or already in debt distress, double 2015 levels, according to the IMF.

What They Said in October

“We reiterate our commitment to strengthening long-term financial resilience and supporting inclusive growth, including through promoting sustainable capital flows, developing local currency capital markets and maintaining a strong and effective Global Financial Safety Net with a strong, quota-based, and adequately resourced IMF at its centre.”

Infrastructure & Climate Change

Looking at ways to scale up sustainable infrastructure and drive digital investment, along with enhancing social inclusion, will be among key talking points. Also likely to be discussed is G-20 support for the IMF’s proposed initiative on climate change and sustainability, the Resilience and Sustainability Trust. IMF staff last month said they hope the executive board will approve the trust by its spring meetings in April and that it will be fully operational by year-end.

What They Said in October

“We take note of the outcome document of the first G-20 Infrastructure Investors Dialogue on financing sustainable infrastructure for the recovery and we look forward to further collaboration between public and private investors to mobilize private capital.”