The International Financial Architecture Working Group holds its first meeting and debates global challenges and priorities

The first meeting of the G20 International Financial Architecture Working Group, presided by Brasil, discussed proposals to remodel the global financial order. The focus is on strengthening international financial institutions, approaching the challenges of sovereign debt and promoting resilient capital flows. The quest for a more effective and representative financial architecture is expected to dominate the proposals discussed in the Working Group, with important advancements in terms of the global economic and financial stability.

With focus on the reform of financial architecture for the 21st century and the escalating risks of country debt, the first meeting of the International Financial Architecture Working Group (GT) —linked to the Finance Track— took place on January 24 and 25, 2024.

According to the WG coordinator, Felipe Antunes, from the Brazilian Ministry of Finance, one of the ideas presented before the G20 by President Lula “was a reevaluation of the developing countries’ debt, especially from the African continent”. The proposal was well received by the participants.

Karin Vazquez, from the Ministry of Finance, coordinated the table on the reform of the Multilateral Development Banks (MDBs). Paulo Mamede, head of the Central Bank's Consultancy Department for Relationships with International Organizations, was also a coordinator at the meeting.

During the press conference held after the session, Felipe Antunes explained the proposals and challenges faced by the international financial architecture. The focus is on deepening and accelerating the reform of international financial institutions. He explained that “the goals of the WG include the discussion of the role of development banks, the developing countries’ sovereign debt, financial security and international capital flow”.

Karin Vazquez explained that the WG is discussing ways to improve and grow the MDBs, and to make them more efficient: “we are going to create an action plan, coordinated by Brasil, and a script for the G20 to improve the MDBs system”. The approach includes an operational revision, debates about size and a long-term capitalization schedule. This will require restructuring operations and an evaluation of the long-term capital requirements. Paulo Mamede highlighted the participation of countries from the Global South in the international financial system.

Other key points refer to the promotion of resilient capital flows for developing countries from emerging markets. The focus is on the evaluation of factors which influence capital flows, especially those related to the green transition, to ensure macroeconomic stability.

In addition to the script for the MDBs, the WG also intends to present proposals to advance debt dealings, governance reforms, as well as to analyze capital flows and the macrofinancial impacts of the integration of payment systems. The document will be discussed in meetings scheduled for June this year, and the final version will be presented during the G20 summit meeting in November, in Rio de Janeiro.