As fears of a second coronavirus wave cloud the outlook for the global economy, particularly in developing countries that lack resources to handle the crisis on their own, major economies do not seem to be treating the situation with the sense of urgency it requires.
Group of 20 finance ministers and central bankers wrapped up a meeting on Saturday with little to show for it. A joint communique issued afterward said members are "determined to continue to use all available policy tools to safeguard people's lives, jobs and incomes," but no new measures were announced.
Support for emerging countries hit hard by the virus is a matter of particular concern. The previous meeting of G-20 finance officials, in April, produced an initiative to suspend debt payments by low-income countries until the end of the year to free up funds that can instead be used to curb the spread of the virus and provide economic and monetary support.
But the World Bank has broached the issue of China, the world's largest creditor to developing countries, not fully upholding the agreement. World Bank Group President David Malpass specifically cited China Development Bank, a major lender for Beijing's Belt and Road infrastructure initiative. The organization has also argued that China has secretively rescheduled the debt payment of some countries such as Laos and Angola -- a move the organization says will work against other debtors and creditors.
Saturday's statement said that "all official bilateral creditors should implement [the debt suspension] initiative fully and in a transparent manner" without mentioning any countries by name.
China must address the concerns expressed by the World Bank and others and fulfill its obligations under the debt forbearance initiative. Given that China has become a top financial power with enormous influence over developing nations, it bears the responsibility to act not only as a guardian but also a leader in fairness, transparency and stability for global finance, especially when the risk of disruption is high.
If China continues to avoid fully implementing the debt initiative, other members should come together to consider ways to urge Beijing to do so. Should the G-20 allow China to set a precedent by not fulfilling its obligations, the key global governance framework risks weakening its clout.
The World Bank and France have called for the debt suspension initiative to be continued through the end of 2021. The G-20 statement punted on this point, saying only that "we will consider a possible extension" in the second half of this year.
But with the world economy recovering more slowly than expected, as shown by the International Monetary Fund sharply downgrading its global economic outlook in June, an extension will likely be unavoidable.
The G-20 has encouraged private-sector creditors to participate in the initiative, but lenders say they have received no requests for payment suspensions. If countries are hesitating to seek forbearance out of concern that it could negatively affect future fundraising, the system will need to be reworked to address the problem.
Developing nations are now global powder kegs, presenting both economic and public health risks that must not be underestimated. Larger countries need to be thorough in snuffing out these potential crises.