Vital for G20 nations to coordinate monetary, fiscal policies, says Snower

Eminent economist and key Sherpa to G20Dennis J Snower on Friday said it is vital for G20 countries to coordinate monetary and fiscal policies as there is a big risk of financial crisis in the future due to the COVID-19 pandemic.

Addressing a virtual event organised by FCC South Asia, Snower said theworldis facing the deepest recession since theGreat Depression and the COVID-19 pandemic has brought huge social dislocation.

"It is vital for G20 countries to coordinate monetary and fiscal policies to take the world economy out of this (COVID-19 induced economic)crisis," he said.

Noting thatat the G20 meeting in Saudi Arabia on Saturday, it is absolutely vital that some agreement must be signed for production and distribution of COVID-19 vaccines, Snower said, "Unless pandemic is defeated everywhere, it cannot defeated anywhere."

The eminent economist also warned of future financial crisis if corrective steps are not taken soon.

"There is a big risk of financial crisis in the future because countries have borrowed more money, this borrowing will put upward pressure on interest rates in the future and rich countries have printed money to buy their own bonds, that could give rise to severe inflationary pressures in the future," he said.

"And if inflation rises, interest rates rise, then we have a financial crisis in the making," Snower added.

According to IMF assessment, rich advanced countries have spent 20 per cent of their GDP on fiscal and monetary stimulus to tide over the economic crisis induced by the COVID-19 and subsequent lockdown to curb its spread.

While poor countries have only spent 2 per cent of the GDP on fiscal and monetary stimulus to take their economy out of COVID-19 pandemic induced economic crisis.

Stating that the world economies are today integrated, the way it was never before, he said climate change can only be tackled at international forums like G20.

"It is not just GDP that matters but we need to give some special attention to the environment," Snower said.

Currently, Saudi Arabia is holding the G20 presidency. India will host the G20 presidency in 2022.