Since the outbreak of the pandemic, public debt surged from 103.8% to 120% on average in advanced economies and from 54% to 63.4% in developing countries, with significant differences among them. After the COVID-induced economic crisis, a new financial crisis may arise, wherever it comes from. Debt relief measures for poor countries were launched by the Saudi G20 and have been recently strengthened by the Italian G20 presidency. Are they sufficient or should they be further enhanced?
The economic harm being caused by the novel coronavirus may soon result in multiple sovereign debtors moving into default territory. But the existing playbook for dealing with multi-sovereign emerging market debt crises is blank.
COVID-19 has further exacerbated the debt situation in sub-Saharan Africa (SSA). Prior to the pandemic about half of low-income countries (LICs) were at high risk of debt distress or in debt distress, including a large number of LICs in SSA. A shift in the composition of debt from concessional to non-concessional financing needed to finance infrastructure and human capital development contributed to higher debt levels.
The G20 measures in 2020 to support low income countries (LICs) facing unsustainable debt burdens were intended to give nations the space to mitigate consequences of the virus and rebuild their economies in a manner consistent with development and climate goals. It has now become acutely apparent that such efforts were incomplete and inadequate. It is paramount that the G20 build on past work on debt relief and supplement it with new thinking and financing.
Overtime, world economies have organized themselves into groupings that define the structures of global multilateralism. Groupings such as the G7 and G20 represent advanced and upper middle-income countries, while the G24 represents lower middle-income countries, except for one low-income country. There are also established memberships to technical multilateral institutions such as the International Monetary Fund (IMF) and the World Bank who are quota-based.
The next months will be crucial for the T20 think tank community to produce policy recommendations in view of the Italian G20 Summit in October. This series of T20-associated events (closed-door and public Roundtables) will offer the occasion to broaden participation in the T20 and add new voices of international experts, civil servants, and representatives of the private sector.
Over the past few decades, most developed countries have made substantial progress in increasing female labour force participation supported by policies assisting families to combine family responsibilities and work. Northern European countries are ahead in terms of family-friendly policies, and this is reflected in female labour force participation, which is higher in these countries, especially for women with children.
To save the euro from collapse, Mario Draghi, then chief of the European Central Bank, reaffirmed markets he would do whatever it takes. Those famous words marked the turnaround of the euro crisis. Fast-forward to 2021. Under his direction as fresh new Prime Minister of Italy, the country that holds the presidency of the G20, world leaders have the unique opportunity to reboot trade cooperation to defeat the pandemic across the globe, whatever it takes.
What are the main variables on which the success of Italy’s presidency of the G20 in 2021 depends? The question is particularly relevant with only a few days to go before the end of a year that has made the need for – and the absence of – effective global governance mechanisms so evident.
Italy’s turn at the G20 presidency could not be more momentous. It comes as the world is facing a second wave of infections of the novel coronavirus, and as new partial or full lockdowns worsen the economic situation in most countries. In this context, the choice of priorities of the Italian government for next year’s G20 – the “three Ps” – sounds increasingly effective, as G20 leaders are called to safeguard “People, Planet, and Prosperity”.