G20 finance heads face reform calls
THE guardians of the global economy are meeting at the International Monetary Fund (IMF) this week to discuss a daunting set of challenges – slowing global growth, banking sector vulnerability and growing calls for multilateral reform.
Alongside the IMF’s annual spring meetings with the World Bank in Washington, DC, finance ministers and central bank governors (FMCBG) of the Group of Twenty, or G20, will meet on 12-13 April.
While problems facing the global economy will be at the top of the agenda, tensions related to the war in Ukraine may make it difficult to produce an agreed plan of action.
“To shore up confidence in the global financial system, G20 officials are likely to discuss providing temporary backstops for bank deposits,” Edward Glossop, the assistant director of macroeconomics at Ernst & Young, told Al Jazeera.
“It seems inevitable that the Fed [United States Federal Reserve] will seek to extend daily swap lines [currency exchanges between major central banks, usually transacted on a weekly basis] until the end of April, to keep an ample supply of money flowing through global markets,” Glossop added.
In January, the World Bank lowered its 2023 growth forecast for the global economy to just 1.7 percent, down from 3 percent. Last week, meanwhile, IMF chief Kristalina Georgieva predicted the world will face years of anaemic growth.
Washington-based lenders have warned that interest rate rises aimed at taming inflation are causing financial turbulence across the world’s banking system.
Over the past 13 months, the US Federal Reserve has raised its benchmark rate by 4.5 percentage points, with other major central banks following suit.
Higher interest rates, which lower the value of fixed-rate assets and raise the probability of default for variable-rate instruments, have been blamed in part for the collapses of Silicon Valley Bank and Signature Bank. Market jitters quickly spread to Europe, resulting in multinational investment bank UBS’s shot-gun takeover of long-struggling Credit Suisse in March.
“The cheap money period came to an end when central banks started raising interest rates to try and lower consumer prices. Global risk appetite has since fallen,” Glossop said.—
Aljazeera