The breakout of the global Covid-19 pandemic in 2020 and the Russian invasion of Ukraine in February 2022 eroded the world’s ability to achieve any Sustainable Development Goals by 2030. According to the latest UN SDG report 2022, Covid-19 erased more than four years of progress against poverty, while the impact of the war in Ukraine led to an increase in the number of people currently living in extreme poverty. One in three people lack regular access to food. Inflation is rising and the external debt of developing countries reached 31% of their GDP in 2021. An IPCC report tells us that we are on a path to a 2.5 degrees Celsius rise in temperature above pre-industrial levels by the turn of the century, with catastrophic consequences for many vulnerable countries and communities. Rising climate disasters, such as the recent floods in Pakistan, are disproportionately affecting people in Least Developed Countries.
A paralysed G20 hinders the Development Agenda
Development issues have been an important element of the G20 sherpa track since 2010. In the aftermath of the 2008 global financial crisis, it became clear that ‘narrowing the development gap and reducing poverty are integral to our broader objective of achieving strong, sustainable and balanced growth and ensuring a more robust and resilient economy for all’. At the time, the G20 also recognised that the impact of its policy actions on low-income countries should be carefully considered. With the adoption of Agenda 2030, the G20 Development Working Group, established in 2010, expanded its mandate to incorporate the SDGs.
It was important for a forum such as the G20 – touted as the premier forum on global economic governance – to take up the mantle of development and its associated challenge of inequality, which the global financial crisis threw into deep relief. However, while lip service was paid to the SDGs and Agenda 2030, the necessary international cooperation to achieve the goals was slow. The Covid pandemic and the war in Ukraine made it even worse. Russia’s invasion of Ukraine brought to the surface a geopolitical conflict that paralysed the development agenda, together with other elements in both finance and sherpa tracks.
Since 24th February 2022, the various working groups and ministerial meetings of the G20 have been unable to issue a joint communiqué, relying instead on the Chair’s Summary. The same is expected to happen with the Leaders’ communiqué. Paralysis at the G20, which in the last decade operated as a platform for preliminary agreement among the systemically important states, is bad for multilateralism, bad for building up trust between advanced and developing economies, and bad for tackling the global problems that beset us.
At the heart of the interconnected nature of these global issues lies how humanity will be able to respond quickly to climate change and manage the energy transition in a fair and socially just manner. This problem impacts not only on immediate concerns, such as food security and debt, but it also affects issues of economic models of development, technology transfer and access, and longer-term social stability.
Development policies: another victim of geopolitical frictions?
So, what can the G20 do to ensure that the broader development agenda does not become the victim of geopolitics?
The G20 is facing the same problem that became apparent during the UN Security Council on the resolutions on Ukraine: the forum is at risk of turning into a fighting ring, where great powers play out their rivalry. If this happens, the rifts between advanced economies and the developing world will deepen, just at a time when it is critical to work together and to deliver on commitments made.
Developing economies regard the G20 inability to agree on joint statements and actions, as another example of advanced economies instrumentalising certain bodies for their narrow self-interest. The credibility gap is thus widening, fuelled by earlier actions such as the broken promises of providing around $100 billion funding per year in climate finance and vaccine hoarding (to name but two).
If the G20 is to keep its focus on Agenda 2030 and on the Paris Agreement, it will have to rebuild the spirit of cooperation across all members, notwithstanding what many consider Russia’s violation of international law in attacking Ukraine. This may be anathema to some in the G20, but it will be necessary. Otherwise, the body cannot continue functioning as a forum for global economic governance discussions that can advance the multilateral agenda in finance, development and economics.
While it is unlikely that anything will change in the run-up to the Indonesian presidency summit, how the G20 community prepares for the next presidency is important for the global developmental challenges. In 2023, the Presidency of G20 will move to India, followed by Brazil and South Africa. India has indicated that it aims at bringing development back to the centre of the G20. How easy might this be? Geopolitically, India is a member of the Quad, as well as of the Shanghai Cooperation Organisation and the BRICS, and it has historical strong relations with Russia. New Delhi has abstained from the UNGA votes on Ukraine, but it has expressed to Moscow its concerns about the war. This may create an opening to a more cooperative engagement within the G20, but the West will also need to consider whether insisting on each communiqué referring to the Russian invasion is going to be helpful in advancing their cause in the longer term.
The need for more financial resources
A G20 agenda focusing on development should focus firstly on the financing elements, which are crucial for achieving the SDGs and climate transition, especially in many developing countries. The Saudi G20 presidency endorsed the Financing for Sustainable Development Framework, but outcomes have been limited. For example, in 2021, net ODA flows came to $177.6 billion, an increase of 3.3 percent in real terms from 2020, or 0.33 percent of donors’ combined gross national income (GNI). Most of the increase was due to DAC members’ Covid-19-related support.
Some progress on debt was achieved under the Saudi and Italian G20 presidencies via the DSSI and the Common Framework for Debt Treatment, as well as agreement on voluntary channelling of SDRs via a new IMF instrument, the Resilience and Sustainability Trust to benefit vulnerable countries.
The DSSI expired in December 2021, having suspended $12.9 billion in debt-service payments owed by participating countries to their creditors. The Common Framework, which is intended to operate on a case-by-case basis, has made some progress in providing debt relief to Zambia, but negotiations are stalled with Ethiopia and Chad. Moreover, private creditors are still outside the process. The RST, in a departure from IMF practice, allows access to middle-income countries that need to have a pre-existing programme with the Fund. The G20 needs to consider a debt sustainability dispensation for middle-income countries as well. In addition, critically, the G20 needs to drive a rethinking of risk assessment in developing countries, compared to advanced economies. During the pandemic, advanced economies accounted for a total of 6 downgrades, while emerging markets and developing economies accounted for 125. Yet, advanced economies contracted twice as fast (-4.9%) as developing ones, with the former’s debt ratio increasing by 124% of GDP, compared to 61% in developing countries. In Sub-Saharan Africa, where over 50% are classified as low-income countries, only the most creditworthy countries can currently access financial flows. The issue of access to finance is a structural challenge in an environment that requires more, not less, financing for development. One can argue that in Africa and other parts of the developing world, countries need to find ways of addressing the insufficient debt problem.
Quality financing to tackle climate change
The other critical dimension of sustainable finance is in tackling the climate emergency in developing countries, without deepening social and economic disparities and increasing the vulnerabilities of the marginalised. Much of the focus has been on the quantity of finance, but it is equally important to focus on its quality. For example, what should the balance be between loans and grants? Are the current risk allocation paradigm and investment return expectations appropriate for the huge task ahead? The Just Energy Transition Partnership that South Africa and a number of international partners announced at the Glasgow COP26, whose details were presented at COP 27, may be an indicator of whether a new paradigm is emerging on climate finance.
The imperative to achieve SDGs
As we look back at 2022, the SDGs have been overshadowed by war, geopolitics and the immediate cost-of-living crisis, which has made countries look inward or to focus on ‘high politics’. The Indonesian presidency of the G20 has managed to keep the discussions going under difficult circumstances. If anything, the war in Ukraine has made the imperative of achieving the SDGs even greater. There is an opportunity to recalibrate G20 cooperation in the coming months to make development the core of the deliberations next year and beyond. Will the G20 leadership be able to rise to that imperative?
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