G20, Paris Forum Discuss Int’l Capital Flows Volatility
The Saudi G20 Presidency and the Paris Forum have discussed challenges around international capital flows volatility and possible policy responses to help restoring sustainable flows of capital and mobilizing robust financing for development.
The high-level ministerial virtual conference that was concluded on Wednesday was co-chaired by Saudi Finance Minister Mohammed al-Jadaan and France’s Minister of Economy and Finance Bruno Le Mair.
The conference brought together top global financial chiefs.
“In response to the unprecedented health and economic crisis presented by the COVID-19 pandemic, governments and central banks around the world have taken exceptional measures, including unprecedented fiscal, monetary and financial stability measures,” said a statement issued by the G20 Saudi Secretariat.
“The launch of the historic Debt Service Suspension Initiative (DSSI) could provide around $14 billion in immediate and critical liquidity relief by official bilateral creditors alone for the poorest nations in 2020, as estimated by the World Bank Group,” it said.
“This global response is delivering results; however, the situation remains challenging. Capital outflows from many emerging and developing countries have reached unprecedented levels, and their ability to draw upon an international pool of capital in a robust manner has been called into question. In this context, related to financial resilience, debt sustainability considering progress on Debt Service Suspension Initiative as well as on development finance agenda amid the COVID-19 pandemic,” it added.
The statement quoted al-Jadaan as saying that in response to the pandemic, G20 countries have implemented unprecedented fiscal, monetary and financial stability measures and ensured that international financial institutions can provide critical support to developing and low-income countries.
“As the crisis remains unfolding, we will coordinate with G20 member countries to promote sustainable financing for developing countries, support the return of capital flows to emerging markets and developing countries, build resilience and promote more sustainable sources of financing.”
G20 and the Paris Club, an informal group of state creditors coordinated by the French finance ministry, agreed in April to freeze debt payments from the 73 poorest countries for the rest of 2020.
"We need to start thinking about what comes next,” Le Maire told the conference.
G20 finance officials are due to meet online on July 18.
The conference fostered in-depth discussions on key issues through three parallel breakout sessions. The first included conversations on the DSSI and explored ways to restore market access for African countries, increase international private flows and support the African private sector, especially SMEs, the statement said.
The second focused on the outlook for capital flows, exploring tools that can be mobilized to mitigate capital outflow risks, and the role of the IMF in long-term financing.
Speaking at the session, Ahmed AlKholiefy, Governor of the Saudi Arabian Monetary Authority emphasized that “restoring flows of capital is essential to upholding the stability of the global financial system."
“We are working with G20 countries to better understand the drivers of these volatilities and discuss policy responses to mitigate them,” the statement quoted him as saying.
As for the third session, it explored ways to improve emerging and developing countries’ resilience, including through domestic capital markets development, while considering the immediate and medium-term trade-offs between different policies as well as the role of international cooperation.