The G20 event is still ongoing. Most recently, the group of countries that are members of the G20 is committed to continuing to support poor countries whose economies are vulnerable and unstable. The G20 is ready to commit by providing funding so that they can rise from the pandemic situation that hit.
The funding commitment for poor countries whose economies are affected by this pandemic situation is one of the results of the G20 International Financial Architecture Working Group (IFAWG) meeting. This event was organized by the G20 Presidency of Indonesia (represented by Bank Indonesia and the Ministry of Finance) virtually on 27-28 January 2022.
IFAWG is one of the G20 working teams that focus on discussions to strengthen resilience and promote stability in the international financial system.
This form of funding assistance is channeled through the IMF Special Drawing Rights (SDR) mechanism, namely voluntary grant funding from countries with strong external economic and financial strength.
The Chief Executive Director of the BI Communications Department, Erwin Haryono, in his official statement explained, “This is part of the continuation of the global ambitions that have been proclaimed by the leaders of the G20 countries at the G20 Rome Summit in 2021.”
In this G20 meeting, it was stated that the world economy has started to improve and is even stronger than during the previous global crisis. This can be proven by the fast economic recovery in the midst of the widespread of the new variant of Omicron.
Even though the world economy is improving, they need to anticipate various risks that could disrupt international financial stability. This must be done so that the progress of world economic recovery does not stop again.
During its first meeting, IFAWG discussed the dynamics of capital flows and the necessary policy responses, especially in developing countries, strengthening global financial safety nets, and efforts to strengthen financial system resilience from various sources of vulnerability.
During the discussion, they also discussed the risks that could disrupt international financial stability. These risks are the potential tightening of monetary policy due to rising inflationary pressures, narrowing of high policy space, continued increase in debt levels in various countries, as well as increased volatility in financial markets.
Next, the G20 countries gave a positive signal for the establishment of a Resilience and Sustainability Trust (RST) by the International Monetary Fund (IMF) as an option for distributing SDRs.
The establishment of this option was created to address long-term funding problems for poor countries and developing countries that have vulnerabilities in dealing with pandemics and climate change.
Furthermore, they also continue to encourage international communication and coordination to strengthen the global financial safety net.
G20 countries also discussed efforts to promote sustainable capital flows. This is done through an assessment of the benefits and risks of currency diversification in international trade and financial transactions.
IFAWG also highlighted efforts to support funding for poor countries and their debt management. G20 countries discussed the direction of strengthening debt management policies for poor countries through the Common Framework for debt treatment beyond the DSSI.
This was discussed because the extension of the Debt Service Suspension Initiatives (DSSI) program for poor countries ended at the end of 2021.
The results of the IFAWG meeting are part of the topics that will be reported to the ministers and central bank governors of G20 countries at the meeting in February 2022.
The ministers and central bank governors of the G20 countries will also later give directions on how the next steps will be taken.