Icon of the G20 Foreign Ministers Meeting in Nusa Dua, Indonesia, July 7, 2022. Photo: AFP/VNA

The conflict in Ukraine, now in its fifth month, has sent commodity prices and the cost of living skyrocketing. The International Monetary Fund (IMF) has warned of global economic uncertainty, with disruptions of the fuel supply to Europe pushing economies toward recession. The IMF lowered its global growth forecast for the third time this year and did not rule out an economic recession next year.

Consensus needed to resolve urgent problems

High on the agenda is inflation, default risks for emerging economies, food insecurity, and rising oil prices. The G20 financial leaders will push global initiatives on green energy, digital banking, and shared tax standards.

While central banks a decade ago were credited with rescuing the world economy from a global financial crisis, now they are harshly criticized for exacerbating inflation. In the last two months, 80 central banks raised their interest rates sharply. Investors are rushing to buy US dollars as macro-economic uncertainties trigger a divestment of capital, forcing authorities to intervene to protect the local currency.

Another big challenge for the financial leaders will be finding a common voice on food insecurity. Multiple countries are struggling with food supply problems. Egypt, Turkey, Bangladesh, and Iran are heavily dependent on Russia and Ukraine, which supply more than 60% of their wheat imports. At the spring meetings of the International Monetary Fund and the World Bank  in Washington in April, the financial officials met with food security experts to address the deepening crisis. Participants agreed to outline common principles and an action plan, but since then little tangible progress has been made.

The G20 financial leaders also need to reach a decision on Washington's proposal to impose a ceiling on Russian oil prices and on protecting currencies that are falling against the dollar.

US Treasury Secretary Janet Yellen. Photo: AFP/VNA

Global economic solutions

US Treasury Secretary Janet Yellen announced a 70 million USD grant to the Growth and Poverty Reduction Trust Fund to help poor countries obtain interest-free loans. She called on China to assist debt restructuring for low-income countries.

The G20’s previous meetings made significant progress on the principles of central bank regulation of cryptocurrencies and digital currencies. The G20 has tried to come up with a way to help poor countries address the food crisis by ensuring the supply and affordability of food and fertilizers. Indonesia's central bank governor Perry Warjiyo said the G20 is working towards a Joint Communiqué or at least a Presidential Statement.

The Russia-Ukraine conflict is casting a shadow over the meeting. Western countries disagree with Russia over the wording of the joint statement, assessment of the global economy, and the impact of the Russian-Ukrainian conflict. The G20 finance ministers and central bank governors finding a solution will depend on governments putting aside political differences and taking strong action to manage unprecedented shocks to the global food and energy system.