The financial leaders of the G7 countries wrapped up their three-day meeting in Niigata on Saturday. The meeting tackled issues such as the US debt ceiling stalemate and Russia’s invasion of Ukraine, which have added more uncertainty to the global economic downturn. The G7 central bank chiefs pledged to counter “rising” inflation and to ensure that future expectations of price performance remain robust. Many central banks face an inflection point as aggressive rate hikes begin to cool growth and destabilize the banking system. Amid heightened uncertainty about the global economic outlook, the finance ministers and central bank officials urged vigilance, agility, and flexibility in macroeconomic policy.
The dispute over the US debt ceiling was discussed during the meeting. The US Treasury Secretary, Janet Yellen, warned that the first debt default in US history could occur within weeks if the impasse is not resolved. The G7 Finance Ministers maintained their April assessment that the global financial system was “resilient,” but said that there are data, supervision, and regulatory gaps in the banking system that need to be addressed. They also condemned Russia’s aggression against Ukraine and set a year-end deadline for launching new plans to diversify global supply chains.
The new plan envisages the G7 providing aid to low- and middle-income countries to enable them to play a greater role in their supply chains. There are concerns about China’s use of “economic coercion” in foreign transactions, which will be a major topic of discussion during the G7 summit in Hiroshima, starting on Friday. The seven countries pledged to ensure that foreign investment in critical infrastructure “does not undermine the economic sovereignty of the host country.”