G20 promises no let-up in stimulus, sees tax deal by summer

Some of the containers waiting to be loaded into a ship at Mombasa Port. [Omondi Onyango, Standard]

The world’s financial leaders have agreed to maintain expansionary policies to help economies survive the effects of Covid-19, and committed to a more multilateral approach to the twin coronavirus and economic crises.

The Italian presidency of the G20 group of the world’s top economies said the gathering of finance chiefs had pledged to work closely to accelerate a still fragile and uneven recovery.

“We agreed that any premature withdrawal of fiscal and monetary support should be avoided,” Daniele Franco, Italy’s finance minister, said after the video-linked meeting held by the G20 finance ministers and central bankers.

The US is readying Sh190 trillion ($1.9 trillion) in fiscal stimulus and the European Union has already put together more than Sh400 trillion (Euros 3 trillion) to keep its economies through lockdowns.

But despite the large sums, problems with the global rollout of vaccines and the emergence of new coronavirus variants mean the future path of the recovery remains uncertain. The G20 is “committed to scaling up international coordination to tackle current global challenges by adopting a stronger multilateral approach and focusing on a set of core priorities,” the Italian presidency said in a statement.

The meeting was the first since Joe Biden - who pledged to rebuild US cooperation in international bodies - US president, and significant progress appeared to have been made on the thorny issue of taxation of multinational firms, particularly web giants like Google, Amazon and Facebook.

US Treasury Secretary Janet Yellen told the G20 Washington had dropped the Trump administration’s proposal to let some companies opt out of new global digital tax rules, raising hopes for an agreement by summer.

The move was hailed as a breakthrough by Germany’s Finance Minister Olaf Scholz and his French counterpart Bruno Le Maire.

Scholz said Yellen told the G20 officials that Washington also planned to reform US minimum tax regulations in line with an OECD proposal for a global effective minimum tax. “This is a giant step forward,” Scholz said.

The G20 also discussed how to help the world’s poorest countries. On this front there was broad support for boosting the capital of the International Monetary Fund to help it provide more loans.