Latest news with #EMDEs
Bangkok Post
2 days ago
- Business
- Bangkok Post
Global banking rules need review
In an era of shrinking resources for development finance, global policymakers must shift their focus to making better use of existing funds. Identifying and removing regulatory barriers that hinder the efficient deployment of capital to emerging markets and developing economies (EMDEs) is a good place to start. The Basel III framework, developed in response to the 2008 global financial crisis, has played a crucial role in preventing another systemic collapse. But it has also inadvertently discouraged banks from financing infrastructure projects in EMDEs. At the same time, advanced economies, with debt-to-GDP ratios at historic highs, face mounting fiscal pressures. Servicing these debts consumes a growing share of public budgets just as governments must ramp up defence spending and boost economic competitiveness, resulting in cuts to foreign aid. Together, these pressures underscore the urgent need to mobilise more private capital for investment in EMDEs. Building resilient and sustainable economies will require transformational investments across the developing world in infrastructure, technology, health, and education. According to the United Nations Conference on Trade and Development (UNCTAD), EMDEs must raise more than $3 trillion annually beyond what they can raise through public revenues to meet critical development and climate targets. Amid these challenges, prudential regulation impedes the ability of EMDEs to raise private capital. This issue can be traced back to the global financial crisis, which wiped out $15 trillion in global GDP between 2008 and 2011. Since the crisis stemmed from weak capital and liquidity controls, as well as the unchecked growth of innovative and opaque financial products, Basel III was designed to close regulatory loopholes and bolster oversight, particularly in response to the rise of the non-bank financial sector. While the revised framework addresses the vulnerabilities that triggered the 2008 crisis, its focus on advanced economies and systemically important financial institutions inadvertently imposes several requirements that restrict capital flows to EMDEs. For example, Basel III requires banks to hold disproportionately high levels of capital to cover the perceived risks of financing infrastructure projects in EMDEs. But these risks are often overestimated. In fact, the data suggest that by year five, the marginal default rates for development loans are lower than those for corporate loans extended to investment-grade borrowers. But despite the lower risk profile, banks are required to hold more capital against development-finance loans than they do against loans to unrated companies over the life of the project. Insurers encounter similar regulatory barriers. Under the European Union's Solvency II framework, an insurer investing in an EMDE infrastructure project faces a capital charge of 49% -- nearly double the 25% required for a comparable project in an OECD country. Historical data show that infrastructure loans in EMDEs perform just as well as those in advanced economies. The significantly higher capital costs that banks incur when making infrastructure loans to EMDEs deter them from supporting transformative, high-impact projects, steering capital toward safer, low-impact investments. Multilateral Development Banks (MDBs) -- international financial institutions, backed by guarantees from developed-economy shareholders and AAA credit ratings, can help reduce capital costs by co-financing EMDE projects and providing lenders with additional assurances. But even when MDBs share the risk, the resulting exposures often remain subject to a 100% capital charge, undermining the very benefits that multilateral engagement is meant to provide. To be sure, Basel III's foundational principles are sound. Capital buffers and liquidity ratios that reflect institutional risk profiles are essential for maintaining financial stability. But several rules within the otherwise well-designed Basel III framework limit EMDEs' ability to pursue sustainable development while doing little to mitigate systemic risk. To improve the regulatory framework for EMDEs, the G20 must take four key actions, using this week's meeting of G20 finance ministers and central-bank governors in Durban, South Africa as a platform for cooperative leadership. First, recalibrate capital requirements for infrastructure project finance to reflect real-world default performance, particularly in the post-construction phase. Second, expand the list of MDBs eligible for 0% risk-weighting under Basel III to include high-performing regional institutions, such as the Africa Finance Corporation, that have investment-grade ratings. Third, clarify the definition of "unconditional guarantees" so that more MDB-backed risk-sharing instruments can qualify for favourable regulatory treatment. And lastly, introduce capital-charge discounts for blended finance structures co-financed by A-rated institutions, with the level of discount varying by rating. These reforms do not require new taxpayer commitments; they simply align regulation with actual risk. Implementing them would crowd in more private investment, reduce borrowing costs for developing countries, and accelerate progress toward transformative development that creates much-needed jobs. The G20 must address these regulatory roadblocks so that capital can flow to where it delivers the greatest value. Reaching consensus on how to lower capital costs for emerging-market economies is one of the top priorities at the meeting of G20 finance chiefs. Reforming the Basel III framework would be a relatively low-cost, high-impact way to mobilise investment, drive job creation, and support sustainable growth in emerging markets. ©2025 Project Syndicate. Vera Songwe, is a non-resident senior fellow at the Brookings Institution. Jendayi Frazer, is a visiting fellow at the Hoover Institution. Peter Blair Henry is the Class of 1984 Senior Fellow at the Hoover Institution.
The South African
20-07-2025
- Business
- The South African
G20 members commit to addressing debt vulnerabilities
Members of the G20 have pledged to address the mounting debt pressures in low and middle-income economies amid global financial turbulence. Image: SAgovnews Home » G20 members commit to addressing debt vulnerabilities Members of the G20 have pledged to address the mounting debt pressures in low and middle-income economies amid global financial turbulence. Image: SAgovnews Members of the G20 have pledged to address the mounting debt pressures in low and middle-income economies amid the global financial is according to Deputy Finance Minister Dr David Masondo who addressed a media briefing following the third G20 Finance Ministers and Central Bank Governors (FMCBG) Meeting held in KwaZulu-Natal this and emerging economies – particularly those in Africa – are grappling with high and rising debt vulnerabilities, shrinking fiscal flexibility and high borrowing costs.'[Members]… reaffirmed their commitment to further strengthen the implementation of the G20 Common Framework. To give effect to this, the G20 FMCBG endorsed the G20 Note on Lessons Learned from the Initial Common Framework Cases and the G20 Note on Steps of a Debt Restructuring under the Common Framework. 'These documents have been published on the G20 website. In addition, fact sheets on the Common Framework country cases for Chad, Zambia and Ghana have also been published on the G20 and Paris Club websites to improve information sharing,' he said. In further discussions, the members also acknowledged the G20 Note on Special drawing rights [SDRs] which, the Deputy Minister said, 'highlights the achievement of exceeding $100 billion in voluntary channelling of SDRs or equivalent contributions for countries in need.'The pledges to this currently stand at some $113.8 billion coming from 35 countries. 'Members also underscored the need for enhancing the representation and voice of developing countries in decision-making in MDBs [Multilateral Development Banks]and other international economic and financial institutions.'Members recognised the relative resilience of capital flows in Emerging Market and Developing Economies [EMDEs] despite heightened global policy uncertainty – underscored by strong macroeconomic fundamentals and sound policy frameworks. 'They also highlighted the growing influence of non-bank financial institutions [NBFIs] and stressed the importance of gaining a deeper understanding of their impact on these flows. Members further emphasised the significance of structural reforms in fostering long-term sustainable capital flows to EMDEs,' said the Deputy Minister. Regarding energy transitions, Masondo said during the meeting, Ministers and central bank Governors considered key recommendations for 'enhancing collaboration among Vertical Climate and Environment Funds, Multilateral Development Banks, National Development Banks and the private sector'.'Members reaffirmed the urgency of scaling up financing for adaptation and just transitions and reflected on key recommendations emerging from a comprehensive analysis undertaken by multiple knowledge partners. These included guidance on integrating adaptation into voluntary transition planning, addressing insurance protection gaps, scaling financing mechanisms, and strengthening enabling environment.'[They] also received an update on the work of the Climate Data Steering Committee, which has developed a set of principles for the development of a Common Carbon Credit Data Model aimed at promoting interoperability and improving transparency of carbon markets. 'They noted that the draft data model is currently undergoing a public consultation with both the private and public sectors,' the Deputy Minister said. The Third Meeting of the G20 Finance Ministers and Central Bank Governors (FMCBG) took place on 17 and 18 July 2025 in Durban. The National Treasury and the South African Reserve Bank are jointly responsible for overseeing the work of the G20 Finance Track under the co-chairship of Finance Minister Enoch Godongwana and Reserve Bank Governor Lesetja Kganyago. Let us know by leaving a comment below, or send a WhatsApp to 060 011 021 1 Subscribe to The South African website's newsletters and follow us on WhatsApp, Facebook, X and Bluesky for the latest news.
India Gazette
07-07-2025
- Business
- India Gazette
Nirmala Sitharaman highlights India's strong economic resilience at BRICS
Rio de Janeiro [Brazil], July 7 (ANI): Speaking at the BRICS Finance Minister and Central Bank Governors meeting, Finance Minister Nirmala Sitharaman highlighted India's demonstrated resilience through a combination of strong domestic demand, prudent macroeconomic management, and targeted fiscal measures. The finance minister, as part of her intervention at the meeting, said that India's policy response to trade and financial restrictions has focused on diversifying markets, promoting infrastructure-led growth, and implementing structural reforms aimed at boosting competitiveness and productivity. The Union Finance Minister underlined India's view that BRICS is a vital platform for advancing inclusive multilateralism, especially when global institutions are facing a crisis of legitimacy and representation -- BRICS must lead by example by reinforcing cooperation, advocating credible reforms, and amplifying the voice of the Global South. Finance Minister Sitharaman also said that while South-South cooperation remains vital in advancing climate and development goals, the Global South should not be expected to carry the main burden of climate action, and BRICS countries are well placed to deepen cooperation on sustainable development. According to the joint statement put out on Sunday, hours before the Summit, the Finance Ministers and Central Bank Governors of the BRICS countries have called on advanced economies and the international financial system to provide 'substantial' finance for climate mitigation in developing economies. '...We call on advanced economies and other relevant actors in the international financial system as well as the private sector to provide substantial finance for climate actions in developing countries, including by expanding concessional finance and increasing private capital mobilisation,' the joint statement read. 'Given the significant adaptation needs of EMDEs (Emerging Market and Developing Economies), we call on international financial institutions to scale up support for adaptation and to help create an enabling environment that encourages greater private sector participation in mitigation efforts,' the joint statement continued. India, a BRICS member, has always been vocal about climate finance arrangements, primarily from the developed countries that are huge carbon emitters. India continued to be vocal about the need for adequate finance, particularly for the Global South. Climate finance typically refers to any financing that seeks to support mitigation and adaptation actions that will address climate change. Developing countries have been of the view that developed nations bear a greater historical responsibility for emissions and should take the lead in mitigation and finance. Finance Ministers and Central Bank Governors of the BRICS countries had gathered in Rio de Janeiro, Brazil, on July 5, 2025, under the theme 'Strengthening Global South Cooperation for More Inclusive and Sustainable Governance'. BRICS member countries encompass almost half of the world's population, spreading across four continents, and their economies account for nearly 40 per cent of global Gross Domestic Product. (ANI)
Time of India
07-07-2025
- Business
- Time of India
Nirmala Sitharaman highlights India's strong economic resilience at BRICS
Tired of too many ads? Remove Ads Tired of too many ads? Remove Ads Popular in Economy 1. Gold loan sees fastest growth in overall securitisation volume in June quarter Speaking at the BRICS Finance Minister and Central Bank Governors meeting, Finance Minister Nirmala Sitharaman highlighted India's demonstrated resilience through a combination of strong domestic demand, prudent macroeconomic management, and targeted fiscal finance minister, as part of her intervention at the meeting, said that India's policy response to trade and financial restrictions has focused on diversifying markets, promoting infrastructure-led growth, and implementing structural reforms aimed at boosting competitiveness and Union Finance Minister underlined India's view that BRICS is a vital platform for advancing inclusive multilateralism, especially when global institutions are facing a crisis of legitimacy and representation -- BRICS must lead by example by reinforcing cooperation, advocating credible reforms, and amplifying the voice of the Global Minister Sitharaman also said that while South-South cooperation remains vital in advancing climate and development goals, the Global South should not be expected to carry the main burden of climate action, and BRICS countries are well placed to deepen cooperation on sustainable to the joint statement put out on Sunday, hours before the Summit, the Finance Ministers and Central Bank Governors of the BRICS countries have called on advanced economies and the international financial system to provide "substantial" finance for climate mitigation in developing economies."...We call on advanced economies and other relevant actors in the international financial system as well as the private sector to provide substantial finance for climate actions in developing countries, including by expanding concessional finance and increasing private capital mobilisation," the joint statement read."Given the significant adaptation needs of EMDEs (Emerging Market and Developing Economies), we call on international financial institutions to scale up support for adaptation and to help create an enabling environment that encourages greater private sector participation in mitigation efforts," the joint statement a BRICS member, has always been vocal about climate finance arrangements, primarily from the developed countries that are huge carbon emitters. India continued to be vocal about the need for adequate finance, particularly for the Global finance typically refers to any financing that seeks to support mitigation and adaptation actions that will address climate countries have been of the view that developed nations bear a greater historical responsibility for emissions and should take the lead in mitigation and Ministers and Central Bank Governors of the BRICS countries had gathered in Rio de Janeiro , Brazil, on July 5, 2025, under the theme "Strengthening Global South Cooperation for More Inclusive and Sustainable Governance".BRICS member countries encompass almost half of the world's population, spreading across four continents, and their economies account for nearly 40 per cent of global Gross Domestic Product.
India Gazette
06-07-2025
- Business
- India Gazette
At Rio de Janeiro, BRICS nations unite, seeking climate finance from developed economies
Rio de Janeiro [Brazil], July 6 (ANI): BRICS member nations have called on advanced economies and the international financial system to provide 'substantial' finance for climate mitigation in developing economies. '...We call on advanced economies and other relevant actors in the international financial system as well as the private sector to provide substantial finance for climate actions in developing countries, including by expanding concessional finance and increasing private capital mobilization,' Finance Ministers and Central Bank Governors of the BRICS countries have said in a joint statement Sunday, just ahead of the Summit. 'Given the significant adaptation needs of EMDEs (Emerging Market and Developing Economies), we call on international financial institutions to scale up support for adaptation and to help create an enabling environment that encourages greater private sector participation in mitigation efforts,' the joint statement continued. BRICS members acknowledged the need to address structural challenges stemming from climate change and energy transitions, biodiversity and nature conservation, among others. 'We reaffirm that predictable, equitable, accessible, and affordable climate finance is indispensable for just transitions, in line with country circumstances and development priorities, and for meeting the goals of the UNFCCC and its Paris Agreement,' the joint statement read. India, a BRICS member, has always been vocal about climate finance arrangements, primarily from the developed countries that are huge carbon emitters. India continued to be vocal about the need for adequate finance, particularly for the Global South. Climate finance typically refers to any financing that seeks to support mitigation and adaptation actions that will address climate change. Developing countries have been of the view that developed nations bear a greater historical responsibility for emissions and should take the lead in mitigation and finance. Further in the joint statement, referring to the current context of uncertainty and volatility, the BRICS member nations asserted that the International Monetary Fund (IMF) must remain adequately resourced and agile, at the centre of the global financial safety net (GFSN), to effectively support its members, particularly the most vulnerable countries. BRICS members also welcomed the New Development Bank's steady expansion of its capacity to mobilize resources, foster innovation, expand local currency financing, diversify funding sources, and support impactful projects that advance sustainable development, reduce inequality, and promote infrastructure investments and economic integration. 'As the New Development Bank is set to embark on its second golden decade of high-quality development, we recognise and support its growing role as a robust and strategic agent of development and modernisation in the Global South,' the joint statement read. In conclusion, BRICS members affirmed they will continue the work throughout the second half of 2025 to advance the initiatives and further strengthen coordination with a view to ensuring a smooth transition and continued momentum under the Indian Presidency in 2026. Finance Ministers and Central Bank Governors of the BRICS countries gathered in Rio de Janeiro, Brazil, on July 5, 2025, under the theme 'Strengthening Global South Cooperation for More Inclusive and Sustainable Governance'. BRICS member countries encompass almost half of the world's population, spreading across four continents, and their economies account for nearly 40 per cent of global Gross Domestic Product (GDP). BRICS economies have become more integrated into the world economy and now represent about a quarter of global trade and investment flows. The joint statement asserted that they recognise that more needs to be done to ensure that the benefits of globalisation, economic growth and productivity spread more equally to all. Total international trade (exports plus imports) of BRICS countries stood at USD 10.5 trillion in 2024 and has increased at a 7.9 per cent CAGR between 2020 and 2024, according to a report by Rubix Data Sciences -- a leading provider of risk management and monitoring solutions. BRICS nations are net exporters, collectively exporting more goods than they import, reflecting their strong production capacities and growing influence in global trade. (ANI)
