G20 commitment to supporting low-income and vulnerable economies and increasing the resilience of the international financial system
Jakarta, January 28, 2022
– The current international financial system is generally considered to be more resilient than during previous episodes of global crisis despite an upsurge in Omicron cases. Nevertheless, various risks weighing on the international financial system must be anticipated to avoid hampering the process of global economic recovery. This was the main takeaway from the G20 International Financial Architecture Working Group (IFAWG) meeting held virtually under the auspices of the Indonesian G20 Presidency (represented by Bank Indonesia and the Ministry of Finance) on 27 and 28and January 2022. The IFAWG is a G20 working group focused on discussing efforts to build resilience and maintain stability in the international financial system.
On the first day of the meeting, the IFAWG discussed the dynamics of capital flows and the optimal policy response for developing economies, strengthening the global financial safety net, and efforts to build resilience in the financial system. facing various sources of vulnerability. Risks to the international financial system, including potentially tighter monetary policy given the build-up of inflationary pressures, limited policy space, still high leverage in various jurisdictions and heightened financial market volatility, dominated discussion given their potential to hamper the global economy. recovery process.
Therefore, the G20 is firmly committed to reviving the global economy, while supporting low-income countries facing economic vulnerability that need financing to cope with the impact of the pandemic by disbursing special drawing rights. (SDR) from the IMF. voluntarily to countries with strong external conditions. This is a continuation of the global ambition applauded by G20 leaders at the Rome summit in 2021. At the meeting, G20 members also welcomed progress made to establish a resilience trust fund. and sustainability (RST) by the International Monetary Fund (IMF) as an option. for the reallocation of SDRs to address long-term financing challenges in low-income countries and vulnerable developing economies, particularly to fight the pandemic and mitigate climate change. In addition, the G20 recognized the importance of fostering international coordination to strengthen the global financial safety net. G20 members also discussed efforts to maintain sustainable capital flows, including analyzing the risks and benefits of currency diversification for international trade and financial transactions.
On day two, the IFAWG discussed efforts to strengthen financial support and debt management in low-income countries. In view of the conclusion of the Debt Service Suspension Initiative (DSSI) for low-income countries at the end of 2021, G20 members also discussed the direction of strengthening debt management policy for low-income countries. poor countries through the Common Framework for Debt Treatment beyond the DSSI. Helping poor countries to improve their debt management capacity was also mentioned. Additionally, G20 members reaffirmed their commitment to increasing transparency and sustainability when providing financial assistance to low-income and developing economies, particularly in the spirit of Recover Together, Recover Stronger.
The Indonesian delegation took the opportunity to emphasize the importance of strengthening the international financial system and maintaining a multilateral spirit to address the global challenges posed by the pandemic to ensure a robust and inclusive economic recovery. Indonesia also reiterated its support to help LICs and LDCs overcome the pandemic.
The fruitful discussion and outcomes of the IFAWG meeting demonstrate the strength of the collective efforts of the G20 to increase the stability and resilience of the international financial system throughout 2022 within the framework of the topics to report and receive additional guidance from finance ministers and central bank governors of the G20 at the meeting in February 2022.
 Special Drawing Rights (SDRs) are international foreign exchange reserves created by the International Monetary Fund (IMF) in 1969 as additional foreign exchange reserves for member countries.