All material subject to strictly enforced copyright laws. © 2022 Euromoney Institutional Investor PLC group
Emerging Markets

Political strife hinders multilateralism amid burning need for co-operation

Sri Mulyani Indrawati at the Presidency Event at the SEC

The inability of the G20 and the IMF’s key policy committee to agree a joint statement on Russia’s invasion of Ukraine was a standout example of splits emerging between the big powers at the Annual Meetings — at a crucial juncture

Tensions between countries and power blocs have put severe strain on efforts to secure multilateral co-operation at the Annual Meetings, just when it is most needed to tackle issues pressing down on developed and developing countries alike — inflation, the surging dollar, debt distress, food insecurity and climate change.

“We need a lot of international co-operation, especially to fight the biggest issue that confronts us, which is climate change,” Raghuram Rajan, former governor of the Reserve Bank of India, told GlobalMarkets. “But I don’t see a huge amount of global goodwill. And this is really my concern. We need all the collective will and co-operation that we can summon if we are to keep climate change from overwhelming us.”

Internal disagreements prevented the IMFC, the fund’s policy arm, and the G20 finance ministers and central bank governors from putting out a joint communiqué, because G7 countries wanted strong language against Russia’s invasion of Ukraine.

Rather than make a direct statement on the war, the IMFC simply recalled that a majority of countries had “deplored” the invasion at the UN General Assembly in March and October. And instead of a communiqué, Sri Mulyani Indrawati (pictured), Indonesia’s finance minister and chair of the G20, gave a summary of the discussions.

“Not just economic factors but geopolitical factors require us to co-operate even more to co-ordinate and synchronise policy, which is becoming so difficult under this fragmented situation,” said Sri Mulyani. “During our meetings, member countries underlined the importance of preserving the G20 as a premier international forum for economic co-operation.”

 

Submerging markets

Speaking at the IIF annual meetings on Friday, former US treasury secretary Larry Summers said he could not remember such a complex set of challenges facing the world in the past 40 years, yet argued that the “fire department is still in the station”.

“The sense of an international community response to what is happening has just not been there this week,” he said.

Despite lots of talk about the need to mobilise financing and support, “emerging market after emerging market is becoming a submerging market as it loses market access,” said Summers.

“If you don't have market access, you don't get large scale private finance, to do a green transition,” he said. “This meeting is not going to be remembered for anything except being a missed opportunity.”

Russia is not the only flashpoint. Relations between the US and China are poor, while a newly assertive India has frustrated Western diplomats by refusing to side strongly against Russia.

“You can argue Washington is driving the decoupling,” said Andy Rothman, head of China research at Matthews Asia. “You can argue Washington is pushing its allies to choose DC or Beijing. Both sides are locked in a cycle of difficult relations which is feeding on itself, and they need to break out of that, as neither country is going away and the reality is that everyone in the region needs to have a good relationship with both.”