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22 December 2022

Our G7 presidency in 2022: results in the Finance Track

Germany’s G7 presidency in 2022 came at a time of global crises. Russia’s brutal war of aggression against Ukraine, the ongoing COVID-19 pandemic, rising inflation, the cooling of the global economy and accelerating climate change: these are challenges that no single country can face on its own. That is why, during its G7 presidency, Germany was strongly committed to pursuing a joint approach with its international partners. This page summarises the results of the G7 Finance Track.

“This is a very difficult time. We are facing major economic risks due to Russia’s invasion of Ukraine. Now more than ever, countries that abide by democracy, the rule of law, multilateralism and a rules-based international order need to work together closely.” Christian Lindner, Federal Minister of Finance

Support for Ukraine

The agenda of Germany’s G7 presidency was characterised by solidarity with Ukraine and efforts to coordinate a joint response to Russia’s attack. The G7 succeeded in mobilising significant financial support for Ukraine in close consultation with Ukraine’s Finance Minister Sergii Marchenko, who attended several meetings of the G7 finance ministers.

Since the war broke out, the G7 (including the EU) and international financial institutions have been working together to provide direct, short-term budgetary assistance to Ukraine in order to ensure that the country has the financial means to continue functioning effectively. In total, more than $30bn in international budgetary assistance was mobilised for 2022. In addition, as part of the strategic planning under Germany’s presidency, international short-term assistance of up to $32bn has already been mobilised for 2023.

In addition to multilateral assistance within the framework of the EU, the IMF and others, Germany provided Ukraine with a bilateral grant totalling €1bn through a special IMF fund in June 2022. Germany also made available €250m in financial assistance to help the Ukrainian government pay public sector salaries and provide assistance to internally displaced persons.

Together with the Ukrainian government and other official bilateral creditors, Germany agreed to a coordinated debt service suspension for Ukraine. Under this agreement, Ukraine’s payment obligations will be suspended until the end of 2023. In addition, Germany provided financial support in the form of guarantees for untied financial loans totalling €300m in 2022.

The G7 members also coordinated closely on sanctions against Russia and their implementation, especially the price cap on Russian exports of crude oil and petroleum products to third countries. The price cap is intended to reduce Russia’s revenue from oil exports while simultaneously preventing price surges on the global markets. The G7 worked together closely under Germany’s presidency to monitor the macroeconomic effects of the sanctions.

The Financial Action Task Force has tightened global standards on transparency with regard to beneficial owners of (fictitious) companies, especially regarding the establishment and strengthening of transparency registers. The G7’s commitment to implementing these standards quickly has gained particular urgency given that Russian oligarchs often use opaque structures to hide their assets.

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Macroeconomic stability

Under Germany’s presidency, the G7 developed joint strategies to mitigate the economic impact of Russia’s war of aggression against Ukraine and promote stability and sustainable growth of the global economy. The German presidency paid special attention to the challenges facing low- and middle-income countries.

Current inflation trends were the focus of Germany’s G7 presidency, especially the price increases for raw materials, energy and food.

The G7 is committed to price stability and to a path of stability-oriented and sustainable growth. The aim is to return to sustainable public finances in the medium term and to mobilise the private and public investment needed in order to facilitate the transition towards a digital and climate-neutral future.

Germany’s G7 presidency put a special focus on providing relief to heavily indebted countries, whose situation has been exacerbated by Russia’s attack on Ukraine and the COVID-19 pandemic.

Under Germany’s presidency, the G7 advocated for a coordinated and sustainable debt strategy and supported the G20’s Common Framework for Debt Treatments. There were intensive discussions on how to implement the Common Framework even more effectively, including a round of talks with representatives of African countries and major creditor countries. This direct exchange took place during the Annual Meetings of the IMF and World Bank in Washington, D.C., and represents a new format introduced by the German presidency.

The G7 also coordinated closely on the current situation in individual countries. The creditor committee for Chad was able to reach an agreement on a debt treatment that may be necessary under the Common Framework. This is the first debt deal agreed under the Common Framework. For Zambia, an agreement was reached on the IMF programme required under the Common Framework.

Detailed information on international strategies to fight debt is available here.

During Germany’s presidency, the G7 drove forward the targeted expansion of the IMF toolkit. It substantially increased financial resources for IMF instruments that are aimed primarily at low-income counties and emerging economies.

  • Resilience and Sustainability Trust (RST): The IMF set up this new fund to finance longer-term structural adjustments, especially in the areas of climate and health. The G7 and other countries pledged nearly $40bn in the form of special drawing rights and currencies. Germany’s contribution to the RST is a loan totalling €6.3bn.
  • Food Shock Window: The G7 successfully campaigned for the introduction of this new lending facility, which forms part of the IMF’s existing emergency funding instruments. It is available to approximately 30 countries that have been hit particularly hard by high food prices. The new lending facility will benefit low-income countries in particular, but Ukraine has received €1.3bn directly.
  • Poverty Reduction and Growth Trust (PRGT): The PRGT is a well-established instrument that provides favourable loans for poor countries. At present, Germany’s contribution to the PRGT is a loan totalling €3bn. This will now be supplemented by a grant of €100m for interest subsidies to ensure that the world’s poorest countries can continue to benefit from very favourable IMF loans. All other G7 members have also pledged grants.

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Climate neutrality

In the area of climate policy, the G7 acknowledged the significant macroeconomic effects of climate change and formulated a common understanding of the need to transition to a net-zero economy.

At their summit in Elmau in June 2022, the G7 heads of state and government agreed to set up an open international climate club. The aim is to enhance international cooperation in the area of climate policy, strengthen climate ambitions, and improve and accelerate efforts to drive forward the transformation of industries.

On 12 December 2022, the G7 heads of state and government adopted the terms of reference establishing the climate club. The club will focus in particular on the decarbonisation of industry, with the aim of boosting climate-friendly growth.

Important preparatory work for the founding of the climate club was carried out within the Finance Track. For example, important questions relating to the terms of reference were discussed in early 2022. The Finance Ministry, under the auspices of Germany’s G7 presidency, also commissioned Lord Nicholas Stern and co-authors to produce an independent report. The report, which was presented in October 2022, highlighted the importance of international cooperation on climate action and made a key contribution to the discussion about a possible climate club.

The G7 finance ministers and central bank governors underlined the importance of ensuring that the impacts of climate change are taken into account and considered in macroeconomic models – and thus also in fiscal policy analyses and decisions. A better understanding of the possible scenarios and costs associated with climate change is an important building block for making effective fiscal policy decisions on the path to net zero.

The G7 finance ministers and central bank governors reiterated their commitment to achieving the collective climate finance mobilisation goal for advanced economies, which amounts to $100bn per year. This was set out in the G7 statement on climate issues.

In the area of climate policy, a core aim within the Finance Track is to ensure that financial institutions place a greater focus on sustainability in their decision-making (sustainable finance). For this reason, the G7 under Germany’s presidency not only welcomed the work of the International Sustainability Standard Board (ISSB), but also took concrete steps to ensure close cooperation between the ISSB and EU standard-setters as well as a stronger focus on the interests of emerging and developing countries. The G7 also agreed to carry out the necessary preparations to apply the ISSB Baseline. In this way, the ISSB has been given a strong mandate as the global standard-setter for sustainability-related corporate reporting. The ISSB plans to finalise its global guidelines for disclosure standards in late 2022.

During its presidency, Germany successfully campaigned for closer attention to be paid to the dangers of illegal financial flows in connection with environmental crimes, with the aim of enhancing the effectiveness of climate and environmental action. The G7 recognised money laundering related to environmental crime as a horizontal task and, in particular, committed to implementing the following two core recommendations of the Financial Action Task Force, which will benefit both environmental action and anti-money laundering efforts:

  • Inclusion of risk exposure to environmental crime in national risk assessments
  • Support for inter-agency and international cooperation and coordination in this area

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Overcoming the COVID-19 pandemic

To facilitate global economic recovery, it is essential to overcome the COVID-19 pandemic in a sustainable way. The G7 expressed its clear commitment to close international cooperation and multilateral approaches.

The G7 was successful in its efforts to improve the global vaccine supply. In the area of vaccine funding, Germany showed leadership and fulfilled its responsibility during its G7 presidency by ensuring that the Access to COVID-19 Tools Accelerator (ACT-A) received adequate financial resources. ACT-A is a global initiative to promote the development, production and fair distribution of COVID-19 tests, treatments and vaccines and to strengthen health care systems.

In March 2022, German Finance Minister Christian Lindner announced that Germany would provide a further $1.5bn to ACT-A and other support measures. With a total contribution of more than €3.5bn, Germany is the world’s second-largest donor country of this initiative.

In addition to the funding for ACT-A, Germany has pledged to provide a total of 175 million vaccine doses by the end of the year.

At the same time, the German G7 presidency reflected on the lessons learned during the pandemic and worked towards the following aims:

  • Improving the global health architecture on a long-term basis
  • Strengthening international coordination and cooperation in the areas of pandemic prevention, preparedness and response

In this area, too, Germany’s G7 presidency promoted structural improvements to help fight future pandemics and campaigned for sufficient and sustainable financing for international health policy – not just for the World Health Organization (WHO), which is at the centre of the global health architecture, but also for pandemic prevention, preparedness and response.

The Financial Intermediary Fund (FIF) was established at the World Bank in September 2022 with the support of the G7. It will help address existing capacity gaps in the international health architecture.

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Digitalisation

Germany’s G7 presidency supported high standards in the area of digitalisation and promoted close coordination on the following key subjects:

Under Germany’s presidency, the G7 supported a swift and effective implementation of the historic agreement on taxing the digital economy, known as the two-pillar approach. The G7 also agreed to support developing economies in implementing the two-pillar approach.

To implement the two-pillar approach, it is necessary to strengthen international cooperation among tax administrations. To this end, the G7 has initiated further steps. The Organisation for Economic Co-operation and Development (OECD) was commissioned to produce a report setting out further options for international cooperation in tax matters. The G7 welcomed this report and called upon the OECD to continue its work.

Under Germany’s presidency, the G7 had multiple discussions about digital payments:

  • Central bank digital currency: The G7 focused on the interoperability of central bank digital currencies, for example by calling for the cross-border usability of central bank digital currencies to be considered at the design stage.
  • Crypto-assets: The G7 supports the work of the Financial Stability Board (FSB) to monitor and manage the risks to financial stability that are associated with crypto-assets. In addition, the G7 underlined that global stablecoin projects require appropriate regulation and supervision.

Cyber-risks in the financial sector are an important issue for the G7. A G7 Cyber Expert Group was established in 2015. During Germany’s G7 presidency, progress was made in the following two areas:

  • Strengthening resilience to ransomeware attacks
  • Managing third-party risks

Documents outlining recommendations in both areas (Fundamental Elements) were issued in October 2022.

Images of our G7 presidency

Minister Lindner and former State Secretary Carsten Pillath on their way to a press conference Christian Lindner in Washington on 20 April 2022
At the IMF and World Bank spring meetings At the IMF and World Bank spring meetings in Washington in April
Christian Lindner welcomes G7 colleagues at the Villa Hammerschmidt A highlight of the G7 presidency: the meeting in Bonn and Königswinter in May
Christian Lindner greets finance minister Shun’ichi Suzuki at the Petersberg. Christian Lindner greets Shun’ichi Suzuki at the Petersberg.
Video conference with Ukraine’s finance minister Sergii Marchenko Video conference with Ukraine’s finance minister Sergii Marchenko
The “family photo” of G7 finance ministers and central bank governors in Bonn The “family photo” of G7 finance ministers and central bank governors in Bonn
G7 meeting during the IMF and World Bank annual meetings in Washington in October G7 meeting during the IMF and World Bank annual meetings in Washington in October
Christian Lindner together with US Treasury Secretary Janet Yellen. Christian Lindner and US Treasury Secretary Janet Yellen
Christian Lindner together with Zambian Finance Minister Situmbeko Musokotwane. Christian Lindner with his Zambian counterpart Situmbeko Musokotwane