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Info Service on Finance and Development (Dec25/01) Berlin, 28 Nov (Maria Syed*) – Since its elevation to a leaders’ forum in 2008, the G20 has self-appointed itself as the central global forum for crisis management, financial regulation, sovereign debt and fiscal policy, and macroeconomic coordination. The G20 members account for more than 85% of global GDP, 75% of world trade, and two-thirds of the world’s population. South Africa’s presidency of the G20 over the last year had raised the hopes of many that with African leadership, the G20 would be motivated to create effective solutions to the debt crisis afflicting the Global South, with its epicentre in Africa. With a doubling of total debt stocks since 2021 to $685 billion in 2023, triggered by spikes in the cost of capital for African nations since the economic shock of the COVID-19 pandemic, many indebted African nations are left with little choice but to spend more national revenue on foreign debt servicing than they do on health, education and climate financing. The recently held G20 leaders’ summit in South Africa reportedly focused on Africa’s economic transformation, debt reform, and investment mobilization, and issued a communique highlighting the need for new development paradigms, a surge of productive investment in infrastructure, energy, education, health, and climate resilience, and reforms to global financial governance to lower the cost of capital for African states. Debt reform was a central theme calling for fairer sovereign debt restructuring, better transparency, a debt refinancing initiative for low-income countries, and the strengthening of multilateral development banks (MDBs). However, the Johannesburg summit was shaped by significant geopolitical tensions, particularly the obstruction of key countries, turning the proceedings into a procedural rigmarole with limited substantive outcomes. Four countries, including the United States, Argentina, Saudi Arabia, and Turkey, chose not to be included in specific joint declarations. The US obstructed negotiations on energy, health, and trade, often drawing “red lines”, refusing to engage in consensus-building, and ultimately boycotting the summit altogether. This boycott forced several working groups to issue only summaries rather than joint declarations. Specific examples of US objections included rejecting references to “energy transition”, insisting on equal prioritization of all energy sources, and opposing language supporting universal health coverage and WHO initiatives. These actions underscored deep fractures within the G20 and limited the forum’s capacity to advance multilateral solutions on health, trade, and energy policy. The summit followed up on multiple meetings of the G20 finance ministers and central bank governors. Apart from restating old rhetoric on initiatives such as a new debt refinancing programme for low-income indebted nations, fair burden-sharing principles, and a multilateral sovereign debt restructuring mechanism with automatic standstills, actionable commitments or procedural proposals were absent. It remains unclear if the G20 will actually undertake any real action, or make any consequential decisions, to redress a global debt challenge chronically mired in an unequal and extractive financial architecture that, by design, puts creditors, lenders and financiers first. Critical junctures of the G20 summit Despite an increase in total climate funding, it remains grossly inadequate to address the scale of the climate change emergency. Although the G20 has adopted language aligning with the UN Framework Convention on Climate Change (UNFCCC)’s goals, it has consistently failed to deliver the substantive action required, particularly in mobilizing sufficient resources for mitigation, adaptation, and principles of climate justice. Climate finance within the G20 is predominantly skewed towards mitigation in commercially attractive sectors, leaving adaptation and just transition initiatives underfunded and overlooked. Simultaneously, African countries spent nearly $90 billion in 2024 servicing external debt, highlighting the impossibility of financing a green transition under such fiscal constraints. The root of the problem lies in the oligopolistic structure of the global financial architecture, which has forced multilateral institutions like the World Bank and the International Monetary Fund (IMF) to act as lenders of last resort beyond their intended mandates. Initiatives like the proposed global loss-and-damage fund, advanced at the 27th Conference of the Parties to the UNFCCC (COP27), have received limited support and have not led to binding commitments, revealing a reluctance among G20 members to address these critical issues openly. Furthermore, climate finance has often been framed as mainly a tool to leverage private capital, which inherently sidelines considerations of equity and redistributive justice, especially for the Global South. Overall, the G20’s approach to climate finance is seen as insufficient, rooted in systemic barriers that hinder a fair and effective response to the worsening climate crisis. The Johannesburg summit lacked binding commitments, clear timelines, and enforceable mechanisms to implement proposals. The case of Afreximbank and Zambia highlights the precarious nature of debt negotiations and the unresolved questions around the preferred-creditor status of regional MDBs. Persistent issues, including high borrowing costs, insufficient private investment, incomplete regulatory reform, and the massive climate finance gap, suggest that visionary discussions alone cannot resolve Africa’s structural challenges. Similarly, there was a lack of alignment with the Seville Platform for Action, a collaborative initiative by countries such as Spain, Brazil, and South Africa, to tax the super-rich to generate revenue, reduce wealth inequality, and improve development funding. Many G20 members had shown limited commitment to implementing these proposals, underlining the fragility of advancing tax justice without stronger institutional backing. Reform of the international financial architecture has been relatively inadequate. Specifically, the G20’s debt service suspension initiative (DSSI) and the common framework for debt treatments had limited impact, excluded indebted middle-income nations, and did little to create meaningful fiscal space from debt relief, while private creditors and MDBs have been largely absent. Consequently, relief primarily benefited low-income countries without addressing broader debt challenges, and negotiations have been slow and fragmented, exemplified by Zambia’s over-three-year-long process marred by creditor disputes and conservative debt sustainability assessments. Similarly, progress in climate finance and just energy transition efforts remains incremental and hindered by systemic obstacles. While the G20 has played a role in embedding climate finance into global governance, its initiatives have primarily focused on technocratic tools such as disclosure standards, taxonomies, and private-capital mobilization, rather than addressing core distributional and justice issues. Current flows of climate finance are far below the estimated needs of about $2 trillion in 2024, against an annual requirement of at least $6.3 trillion annually through 2030, with mitigation funding significantly outpacing adaptation support. Moreover, climate finance remains a fraction of fossil fuel subsidies, which reached approximately $7 trillion in 2022, continuously locking in carbon-intensive practices. Both the areas of debt resolution and climate finance highlight systemic inertia, with efforts often limited to incremental reforms rather than transformative change. While the frameworks and initiatives signal recognition of the issues, actual progress remains slow, hampered by creditor fragmentation and entrenched financial interests. Addressing these intertwined challenges requires moving beyond technocratic fixes towards systemic reforms that prioritize fairness, redistribution, and justice, crucial for advancing both sovereign debt sustainability and a just energy transition. Overall, the G20’s political limitations in addressing systemic debt and development issues reinforce calls for a UN-led multilateral framework that would provide a fairer, more enforceable structure for sovereign debt resolution. While the Johannesburg summit sought to lay out an ambitious roadmap for investment, debt sustainability, and African-led development, meaningful progress has been hampered by a lack of political will, coordinated action, and follow-through from both international and African institutions. * With inputs from Bhumika Muchhala
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