The flags of participating countries fly outside the Bharat Mandappam' at ITPO Convention Centre, Pragati Maidan, the venue of the upcoming G20 Heads of State and Government Summit in New Delhi, India, 04 September 2023. EFE-EPA FILE/HARISH TYAGI

Debt debate to test India’s claim to Global South leadership during G20 summit

By Hugo Barcia

Locals pass by the G20 logo near the Bharat Mandapam at ITPO Convention Centre, Pragati Maidan, the venue of the G20 Heads of State and Government Summit in New Delhi, India, 31 August 2023. EFE-EPA FILE/HARISH TYAGI

New Delhi, Sep 5 (EFE).- Debt restructuring, a growing need for more and more countries, is set to be one of the main topics on the agenda of the G20 leaders’ summit, set to be held between Sep. 9-10 in New Delhi.

It is also a matter of special interest for host India, which is seeking to emerge as the voice of the Global South.

Excess debt among emerging economies was one of the most discussed topics during the meeting of G20 finance ministers and central bank chiefs, held in western India in July, due to China’s reluctance to accommodate restructuring, despite being the largest lender worldwide.

Due to the lack of consensus, India is expected to again table the issue to try and reach an agreement, even as Beijing has insisted that the debt burden should be borne by the multilateral financial entities through their assistance programs.

Renowned Indian economist Santosh Mehrotra told EFE that India’s stand was mainly linked to its keenness to emerge as the visible leader of the Global South, which is the bloc worst-affected by the lack of consensus.

“This is not on India’s (own) agenda, because India is not indebted externally, practically not at all. (…) If it becomes the top agenda, then it will be only because of India’s attempt to be projected as a leader of the Global South,” Mehrotra told EFE.

Global debt climbed to over $300 trillion in the first quarter of 2023, according to a report by the Institute of International Finance, making it more than three times the total GDP value of all countries, that had touched $100 trillion in 2022.

Out of this amount, $92 trillion is in public debt, according to data provided by the United Nations Conference on Trade and Development.

The debt load mainly affects developing countries – which bear 30 percent of the public debt – and is especially reflected in cases such as that of Sri Lanka, which has been devastated by a severe financial crisis with the debt exceeding 100 percent of its GDP.

Colombo received a $3 billion bailout by the International Monetary Fund earlier this year.

Similarly, Zambia signed a historic agreement in March with its creditors to restructure debt that exceeded $17 billion in 2022.

In contrast, India’s external debt stood at $624 million or 18.9 percent of the GDP in March, and does not present a major concern for the government.

After receiving the rotating G20 presidency from Indonesia in December, India has tried to emerge as the main promoter of the interests of developing nations, which have traditionally been “overlooked” by the wealthy “North” according to New Delhi.

Indian officials have referred to this disparity repeatedly this year, including in a speech by the external affairs Subrahmanyam Jaishankar during the Business 20 (B20) meeting of the bloc in New Delhi on Aug. 26.

“It is an undeniable reality that the international system remains dominated by the Global North. This is naturally reflected in the composition of the G20 as well,” the minister said, adding that the Global South had been largely reduced to “being a consumer rather than a producer” and provide resources for other nations.

He insisted that this dynamic needed to be reversed through a re-globalization.

Another major economic issues on the summit’s agenda is financing initiatives to counter climate change.

The focus in this regard will be on the developed nation’s failure to fulfill their 2009 commitment, when they had pledged to assign $100 billion annually in climate-related aid to emerging economies by 2020.

Throughout this year, the G20 has also stressed the urgency of expanding and reforming multilateral banking institutions such as the International Monetary Fund and the Asian Development Bank, aimed at dealing with poverty in underdeveloped nations.

The challenges stemming from banks adopting digital currencies are also an important topic due to their implications for the existing systems and cross-border payments, and new regulations could be laid down to control the volatility created by the currencies. EFE