Russia’s war on Ukraine, which has escalated food and energy prices, is the most important threat to global growth, United States’ Treasury Secretary Janet Yellen said on September 8, stressing that the G-20 remains an effective forum to address global challenges even without Russia’s active participation, a reference to Vladimir Putin’s decision to skip the bloc’s New Delhi summit.
The Treasury Secretary said India’s G-20 leadership has proven effective on several fronts, including the reforms of multilateral development banks and addressing the debt concerns of vulnerable countries.
Also read | G20 Summit Delhi 2023 Live Updates
“We see G-20 as the premier organisation that is taking on critical challenges facing the global economy and particularly the global South. And I believe the G-20, in spite of obvious problems due to Russia’s war against Ukraine, and Russia’s general absence from G-20 initiatives, I believe that G-20 has been extremely effective, and especially under India’s leadership. Our goals for the G-20 have coincided closely with those of India and we’ve tackled very important challenges,” Ms. Yellen remarked.
On the prospects of the G-20 summit in New Delhi yielding a communique, Ms. Yellen noted it is challenging to craft such language but the negotiators are working hard to do so. “We stand ready certainly to work with India to try to draft a communique that successfully addresses this concern,” she said in the capital.
The Treasury Secretary exuded confidence about being able to provide supplementary funds to help Ukraine, noting that there has been bipartisan support in both houses of the Congress for Ukraine. Reiterating that the most important thing “we could do for global growth is for Russia to end its brutal war on Ukraine”, Ms. Yellen, however, expressed surprise at the strength and resilience of the global economy.
“Recently, the International Monetary Fund (IMF) has somewhat improved its economic projections. But many countries have built important buffers which have enabled them to weather very significant shocks to the global economy. And whilst there are risks and some countries that have been certainly affected, overall, the global economy has been resilient and as you know, the United States has done particularly well,” she noted.
Ms. Yellen also signalled that the U.S. is taking the lead on bolstering multilateral development banks’ (MDBs) lending capacity and leaving it to other countries to do what they can, and stressed that this was not just aimed at curbing the dependence of developing economies on Chinese loans.
An expert group set up by the Indian Presidency has recommended reforms of the multilateral development banks that could scale up their funding capacity by $200 billion over the coming decade. However, some G-20 members have expressed reluctance about the plan as they are unsure about how much they may have to contribute to enhance these development banks’ capital base.
U.S. President Joe Biden has initiated a move to provide $2.25 billion of funding for the World Bank, which alone could expand its lending capacity by $25 billion, and a $25 billion loan to the International Monetary Fund (IMF) that would help provide concessional finance to low-income countries, Ms. Yellen pointed out.
The additional World Bank funding from the U.S., she said, will help the IDA [the World Bank’s development finance arm] to make very low-cost subsidised loans to the most challenged low-income countries, as well as concessional finance to attack global problems. “And we have asked other countries to join with us to the extent that they’re able to in this initiative. We are hopeful that other countries, depending on their financial capacity will join us and we can scale that up,” Ms. Yellen noted.
“We’re also looking forward to discussing the possibility of putting in place other capital adequacy framework recommendations, like adding callable capital that could further increase the resources… So these are important initiatives, doing what we can. And it’s not just a question of responding to China, it’s a question of addressing long standing global challenges, reducing poverty, addressing global public goods issues,” she emphasised.
‘Oil price cap still hurting Russia’
The U.S., she said, is monitoring the evasion of sanctions imposed on Russian oil exports, noting that substantial sales of Russian oil are occurring with the use of Western services like insurance and shipping, but those sales are happening below the $60 per barrel price cap set for availing such services.
She downplayed concerns that that Russia has managed to work around the price cap imposed on its oil exports. “My perception is the price cap — which had two goals, to cut Russia’s revenues and keep the global market well-supplied — continues to work. Our estimate is that Russia’s revenue from oil has declined by around 44% over the last year… and Russia’s exports into the global market have continued and have not significantly contracted.”
“Now, this $60 price cap applies to any oil sold using services from members of the coalition. and although there are sales that are permitted under the price cap that do not use Western services, and many of those are occurring at prices above $60, they are not a violation of the price cap and it is very expensive for Russia and other countries to provide services where Western providers have clear price advantages. So while such things are occurring, it erodes the revenue that Russia is able to receive on net from those sales,” she underlined.
‘Chinese slowdown could hit East Asia’
Responding to a query on the implications of a slowing Chinese economy, Ms. Yellen said the country faces a variety of short and long term economic challenges that the U.S. has been monitoring carefully, including the less than anticipated pickup in consumer spending after COVID restrictions were lifted and “long-standing issues” in the property sector.
“Longer term, of course, population growth has now turned negative and the labour force is beginning to shrink. So we see China’s growth as slowing over time. That said, China has quite a bit of policy space to address these challenges. So we’re monitoring the situation [but] I don’t see it as having very significant direct impact on the United States. Several countries in East Asia are more likely to be affected by the slowdown,” she noted.