By Maria Martinez, Olivia Kumwenda-Mtambo and Kopano Gumbi
DURBAN, July 18 (Reuters)
The most recent G20 summit, held in South Africa, presented the challenge of debating the attempt to establish a new global coordination framework in the face of growing economic challenges. The importance of having independent central banks was highlighted amid political and economic tensions. Learn more about the unfolding of this important discussion forum, which was absent from the United States.
Central Bank independence in the face of global economic tensions
Finance chiefs from the Group of 20 countries stressed the importance of central bank independence while pledging to boost cooperation in a joint statement issued on Friday after a two-day meeting in South Africa. In their first communique since last October, a month before U.S. President Donald Trump’s election victory paved the way for his subsequent tariff war, the ministers and central bankers highlighted the uncertainty in the global economy caused by conflict, trade tensions and frequent extreme weather events.
The issue of central bank independence had hung heavily over the meeting in South Africa’s coastal city of Durban following Trump’s repeated berating of Federal Reserve Chair Jerome Powell for not cutting interest rates, attacks that have roiled global financial markets.
“The significance of this motherhood and apple pie communique is that it exists at all, though its sprawling nature once again underscores the need for thorough G20 streamlining. Its strong and welcome defence of central bank independence stood out, given President Trump’s misguided attacks on Chair Powell” said Mark Sobel, a former senior Treasury official.
The communique was reached in the absence of U.S. Treasury Secretary Scott Bessent from the two-day meeting, with Washington represented by Michael Kaplan, acting under secretary of the Treasury for international affairs. Bessent also skipped the previous G20 finance chiefs’ gathering in Cape Town in February, although Washington is due to assume the G20’s rotating presidency in December.
New directions for the Global Macroeconomy
South Africa’s deputy finance minister David Masondo told reporters that the meeting outcomes contained in the communique were “consented to by all members” and centred on “strategic macroeconomic issues”.
The fact that the G20 includes more strategic macroeconomy issues reflects a welcome change. This shows that the summit is more willing to discuses structural and systemic economic issues across the globe. The decisions were unanimous, which strengthens multilateral cooperation between countries, even with political differences.
While it referred to “extreme weather events and natural disasters” as economic challenges, the communique did not explicitly address climate change. The word “tariff” was notable by its absence from the document, which instead referred to “trade tensions”. Trump’s tariff policies have torn up the global trade rule book and clouded the economic outlook almost everywhere. With baseline levies of 10% on all U.S. imports and targeted rates as high as 50% on steel and aluminium, 25% on autos and potential levies on pharmaceuticals, extra tariffs on more than 20 countries are slated to take effect on August 1.
G20 diplomatic limits
The G20 communique also contained no mentions of Russia’s invasion of Ukraine, a divisive point for the group, nor the conflict involving Israel and Hamas in Gaza. Instead, it mentioned “ongoing wars and conflicts” without elaborating.
Diplomatic challenges remain at the G20, as evidenced by the lack of direct mention of specific conflicts, such as the war in Ukraine and the crisis in Gaza. The summit clearly avoids internal divisions, given the countries’ differing positions on the issues involved.
The role of the G20 is not only technical, but diplomatic
The choice of neutrality and focus on the economy ultimately limits discussions on the geopolitical impacts on global economic stability. But despite this, and the notable absences, the summit fulfilled its important role in reaffirming the importance of multilateral cooperation for monetary stability, with central bank independence.