Kemi Osukoya

February 12, 2021

The finance leaders from the world’s top seven leading economies, the European Central Bank, International Monetary Fund and the World Bank held a virtual meeting on Friday to plot a way out of the current global economic crisis imposed by the Covid-19 pandemic as well as mull a solution to the ongoing international tax disputes on digital economy.

The meeting, hosted by United Kingdom Chancellor of Exchequer Rishi Sunak and Bank of England Governor Andrew Bailey, is the first under the U.K. G7 Presidency, which began on January 1. 

U.S. Treasury Secretary Janet Yellen, Federal Reserve Chairman Jerome Powell along with their counterparts from Canada, France, Germany, Japan, Italy, European Central Bank President Christine Lagarde, IMF’s Managing Director Kristalina Georgieva and the World Bank Group President David Malpass were in attendance at the online event.

Secretary Yellen expressed the Biden Administration’s commitment to multilateralism to solve global issues, noting that the United States “places a high priority on deepening our international engagement and strengthening our alliances.”

This is the first international event for Yellen since she took the wheel at the Treasury three weeks ago. The Secretary used the opportunity to underscore the importance of equipping the global economy with further fiscal support to promote a robust and lasting recovery, stating that “the time to go big is now.”

The event, which leads up to the G7 Summit later in June, comes in urgent purview that additional swift global coordinated decisive response is needed to address the economic damages and challenges couriered in by the Covid-19 pandemic. 

According to the latest IMF’s forecast, the global economy is projected to grow 5.5 percent in 2021 and 4.2 percent in 2022, up 0.3 percentage point from the previous forecast for 2021. The resilience of the recovery is projected to vary significantly across countries, depending on access to medical interventions such as vaccines and therapeutics, efficacy of policy-domestic and international support, exposure to cross-country spillovers, and structural characteristics entering the crisis.

The projected growth recovery this year follows a severe collapse in 2020 that has had acute adverse impacts on women, youth, the poor, the informally employed, and those who work in contact-intensive sectors. The global growth contraction for 2020 is estimated at -3.5 percent, 0.9 percentage point higher than projected in the previous forecast (reflecting stronger-than-expected momentum in the second half of 2020).

The pandemic has also inadvertently brought to the forefront the once unhurried issues of climate change, biodiversity as well as socioeconomic inequalities.

A recent survey by the Geneva-based International Labor Organization shows that the covid-19 pandemic severely disrupted the global labor markets in 2020, forcing 255 millions full-time workers out of the workforce, which is four times higher than the number of jobs lost during the Great Recession of 2009.

To keep pace on sustainable recovery as countries try to climb out of the current economic crisis, the meeting host, Chancellor Sunak laid out the G7’s priorities for the year ahead, which include protecting and strengthening the global labor markets, shifting to net zero carbon emission, using the moment to urge his counterparts to match the UK’s ambitions ahead of the upcoming COP26.

Secretary Yellen said the G7 should seek out more ways to assist low income countries that are struggling to deal with the pandemic as well as provide leadership on climate change adaptation and climate financing efforts, noting that the U.S. is ready to play a crucial role in achieving those goals.

Experts say tackling these issues head-on will give countries, especially emerging and developing countries, the sustainable support and boost they need to get the global economy back on track.

As part of the group’s efforts to provide assistance to emerging and developing countries, the G7 continued to provide debt suspension relief, under the Debt Service Suspension Initiative and Common Framework endorsed by the G20 and the Paris Club for the most vulnerable countries.

The debt suspension program was established in April 2020 following the global declaration of a global health pandemic by the World Health Organization.

At the last G7 finance virtual meeting that was held in December, the top finance leaders discussed the group’s response and strategies to the covid-19 pandemic. They also discussed and had a consensus view on how to deal with the emerging digital money and digital payments—crypto assets and other digital assets and national authorities’ work to prevent their use for malign purposes and illicit activities.

The group agreed that strong regulation on digital currencies is needed. 

*This article has been updated.

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