Debt load may pose threat to nations: PM

Addressing the inaugural session of the first finance ministers and central bank governors meeting of the G20 under India’s presidency, Modi also pressed for reforms at multilateral institutions, pointing out that the reluctance to make changes contributed to the erosion of trust in international financial institutions.

The statement comes a day after US treasury secretary Janet Yellen said that China’s cooperation is needed to resolve debt in several distressed countries. She also highlighted the need to “provide debt treatment to Zambia and to commit to specific and credible financing assurances for Sri Lanka”.

The International Monetary Fund has estimated that about 60% of low-income countries are in, or at high risk of, debt distress—double the 2015 level, and about 25% of emerging economies are at a “high risk” and are facing “default-like” borrowing spreads.

“The covid pandemic has delivered a once-in-a-century blow to the global economy. Many countries, especially developing economies, are still coping with its after-effects. We are also witnessing rising geopolitical tensions in different parts of the world. There are disruptions in global supply chains. Many societies are suffering due to rising prices. And food and energy security have become major concerns across the world. Even the financial viability of many countries is threatened by unsustainable debt levels. It is now up to you—the custodians of the leading economies and monetary systems of the world—to bring back stability, confidence and growth to the global economy. It is not an easy task,” said Modi during his video address at the meeting in Bengaluru.

India’s G20 sherpa Amitabh Kant also recently spoke about how China needs to play a role in settling debt with these economies by taking a haircut. “China needs to come out openly and say what their debt is and how to settle it… It can’t be that the IMF takes a haircut and it goes to settle Chinese debt. How is that possible? Everybody has to take a haircut,” Kant told Bloomberg earlier this month.

International Monetary Fund (IMF) managing director Kristalina Georgieva said on Thursday that the IMF, World Bank and India’s G20 presidency would convene a new Global Sovereign Debt Roundtable to find lasting solutions to the stressed sovereign debt levels of low-income nations. According to the IMF, about 15% of low-income countries are in debt distress, and another 45% are at high risk of debt distress.

PM Modi and finance minister Nirmala Sitharaman have stated that India, as G20 president, will be the voice of low-income and developing economies and will push for reducing the sovereign debt of poorer nations.

“I would urge that your discussions should focus on the most vulnerable citizens of the world. Only by creating an inclusive agenda will the global economic leadership win back the confidence of the world,” said Modi in his address.

The meeting, spread over three sessions on Friday and Saturday, will cover issues like leveraging digital public infrastructure for advancing financial inclusion and productivity gains, financing resilient, inclusive, and sustainable cities for tomorrow, and strengthening multilateral development banks to address shared global challenges like sustainable development goals.

Modi also urged the G20 meeting delegates to experience India’s “path-breaking” digital payments platform Unified Payments Interface (UPI), which could become a template for other countries. He added that India would be happy to share its experience with the world on digital payments.

“During our G20 presidency, we have created a new system. This allows our G20 guests to use India’s path-breaking digital payments platform, UPI. As you make use of it and experience its ease of use, you will understand why Indian consumers have adopted it so willingly. Examples like UPI can be templates for many other countries, too. We would be happy to share our experience with the world. And, the G20 can be a vehicle for this,” said Modi.

He said that India’s digital payments ecosystem, which is “highly secure, highly trusted, and highly efficient”, has been developed as a free public good and has radically transformed governance, financial inclusion, and ease of living in India.