Presidency Of The G20 RI Galang Supports The Multilateral Bank Capital Scheme To Face Global Challenges

Minister of Finance Sri Mulyani (right) in the G20 meeting in the United States (Photo: Doc. Ministry of Finance)

JAKARTA The G20 Indonesia Presidency stated that the review of the capital adequacy Framework (CAF) framework is the right solution that can help optimize the Multilateral Development Banks (MDB) balance sheet in handling global challenges.

This was conveyed by the Minister of Finance (Menkeu) Sri Mulyani at a conference that was included in the G20 agenda in Washington DC, United States this week.

"Reports show that capital exemption in the MDB balance sheet which can provide additional financing of up to 500 billion US dollars is of course a promising solution in the current situation," he said as reported by the official website on Thursday, October 13.

The Minister of Finance wants this initiative to continue so that it can get certainty from member countries in its future implementation.

"We hope that these recommendations will be discussed because it will also be very important input for the Indonesian G20 Presidency, and what is certain is that this will be communicated and adopted by India's G20 Presidency next year," he said.

The Minister of Finance explained that the G20 Presidency of Indonesia prioritizes that each representative of the state and group can voice their respective views so that the spirit of "Recovering Together, Recovering Stronger" becomes more relevant.

Strong leadership and fast collective action are needed to maintain global development goals, protect people's livelihoods that are threatened and also encourage stronger, sustainable, balanced, and inclusive global economic growth, he said.

Through this method, continued the Minister of Finance, MDB plays an important role in these efforts, not only through more financing but also to encourage the participation of the private sector in development.

"Throughout 2022, the world is experiencing an increase in market volatility which carries a major threat to financial market stability and fiscal sustainability. These risks greatly affect countries that include Emerging and Development Economics (EMDEs)," he added.

Meanwhile, pressure on the state budget has increased substantially in most EMDEs in recent years to deal with the COVID-19 pandemic, protect the lives and livelihoods of vulnerable groups of people, and provide support for economic recovery.

"As a result, countries that have a high debt value will face increasing budget pressure with soaring costs of funds in line with increasing capital outflows and local currency depreciation," he said.

To note, the grim world economic outlook and rising risks have been confirmed by the World Economic Outlook of the IMF with a third of the global economy projected to contract either this year or next year.

"The dependence of these countries on MDB support is becoming increasingly important, especially as global uncertainty and volatility continue. Therefore, the need to increase MDB resource capacity is increasingly urgent," closed the Minister of Finance Sri Mulyani.