Washington: An ambitious goal to boost global growth by $2 trillion in the next five years is within reach, finance officials of the world’s major economies believe, despite a variety of threats, including rising political tensions over Russia’s actions in Ukraine.
In a joint statement Friday, finance ministers and central bank governors from rich and developing nations skirted over substantial differences in such areas as central bank interest rate policies and whether to impose tougher sanctions on Russia because of its dealings with Ukraine.
Their talks resume Saturday with meetings of the policymaking committees of the International Monetary Fund and its sister institution, the World Bank.
The final Group of 20 communique pledged to keep working on concrete economic reforms that could boost global growth by 2 per cent over the next five years. But finance officials concede that the economic reforms needed to achieve that goal will in many cases be politically difficult.
“We remain vigilant in the face of important global risks and vulnerabilities,” the statement said.” We are determined to manage these risks and take action to further strengthen the recovery, create jobs and improve medium-term growth prospects.”
Australian Treasurer Joe Hockey said all the finance ministers realised that hard decisions would have to be made in terms of reforming labour market policies and dealing with budget deficits.
“It is hard but that is the only way we are going to grow the economy,” Hockey, who is chairman of the G20 this year, told reporters at news conference after the group’s two days of discussions.
The finance ministers agreed to develop concrete proposals for each of their countries and present those plans at a September meeting in Australia in preparation for a G20 leaders’ summit on Nov. 15-16 in Brisbane that will be attended by President Barack Obama and leaders of the other nations.
The tough language the US has been using threatening “additional significant sanctions” if Russia escalates the Ukraine situation was missing from the statement by the G20, which includes Russia. Instead, the G20 finance officials said they were closely monitoring the economic situation in Ukraine, “mindful of any risks to economic and financial stability.”
But at a news conference late Friday, US Treasury Secretary Jacob Lew insisted that there was strong support for tougher sanctions if Russia continues to escalate the situation in Ukraine. Lew said that the Western allies “stand together in asking Russia to step back.”
The G20 group endorsed the $14 billion to $18 billion loan package that the International Monetary Fund has developed to help Ukraine avoid a financial collapse. IMF officials have said the lending agency’s support program will likely be approved by the agency’s board of directors by the end of this month or early May.
The United States and various European nations have already imposed an initial round of sanctions aimed at punishing Russia for its annexation of the Crimean Peninsula.
The United States is raising the prospect of tougher penalties if Russia attempts to annex parts of Eastern Ukraine, but European officials have been hesitant to go further, worried about possible economic retaliation by Russia.
Also missing in the G20 statement was a lengthy section that had been included in the February statement concerning the need for continued low interest rate policies by major central banks.
Asked about that change, British Chancellor of the Exchequer George Osborne said, “I wouldn’t read too much into that” and joked “we’re trying to keep the communique much shorter.”
He noted that the Federal Reserve and the Bank England were moving cautiously to reduce stimulus efforts as the US and British economies improve. However, some critics have expressed concerns that there is a danger that central banks could move too quickly to reduce support before labour markets improve.
The United States came in for criticism in the G20 communique for the failure of Congress to approve US funding for the IMF that is needed to implement a reform program that the 188-nation lending agency adopted in 2010.
That program would give the IMF more resources to help countries in economic distress and provide greater voting rights to developing economies such as China.
But the measure has stalled in Congress for years and supporters failed again in March to win congressional approval.
The G20 officials said they were “deeply disappointed” with the continued US delay and said if approval was not obtained by the end of this year, the IMF should explore other options. The statement did not say what options might be available if there is continued US inaction.