Russia, China water down G20 text on geopolitical tensions

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© Reuters. Head of delegates prepare for a meeting on the last day of the G20 finance ministers and central bank governors meeting in Jakarta, Indonesia, February 18, 2022. Mast Irham / Pool via REUTERS
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By Gayatri Suroyo and Leika Kihara

JAKARTA/TOKYO (Reuters) – Finance leaders from the Group of 20 major economies will likely warn on Friday that rising inflation and geopolitical risks could threaten a fragile global recovery, as the crisis in Ukraine and the COVID-19 pandemic’s fallout cloud the outlook.

Fears that Russia might invade Ukraine overshadowed a meeting of G20 finance ministers and central bank governors, which was expected to focus heavily on how to whittle down crisis-mode stimulus policies without disrupting a post-pandemic recovery.

In a draft communique seen by Reuters, the finance chiefs from the world’s leading economies pledged to use “all available policy tools to address the impacts of the pandemic,” while warning that future policy space was likely to be “narrower and uneven.”

Inflation is currently elevated in many countries due to supply disruptions, a mismatch in supply and demand, as well as rising commodity and energy costs, the draft communique said.

“Central banks will act where necessary to ensure price stability in line with their respective mandates, while remaining committed to clear communication of their policy stances,” the ministers and governors said.

The draft statement contained no direct reference to the crisis on the Ukraine-Russia border, saying only the G20 will continue to monitor risks, “including those arising from (current) geopolitical tensions.”

The word “current” in brackets indicates that it may be deleted in the final communique if Russia, a member of the G20, pushes back against the language.

The G20 finance leaders will issue the final communique after their meeting ends on Friday. The talks were held both virtually and in Jakarta.

The diverging pace of recovery from the pandemic is complicating the policy path for central banks. Expected steady interest rate hikes by the U.S. Federal Reserve have drawn attention to the potential fallout for emerging markets.

While cases of the Omicron variant of COVID-19 are receding in many wealthy countries, they are still rising in many developing nations including host country Indonesia.

The G20 finance leaders are expected to voice support for ensuring timely and affordable access to COVID-19 vaccines, therapeutics, diagnostics and other medical supplies for low- and middle-income countries, according to the draft communique.