There will be a commitment to avoid overt protectionist measures at the upcoming G20 summit in London, say the analysts at Global Insight. That's the easy part. However, in practice there may be intensifying local pressure to resort to indirect protection and less obvious protectionist measures as global trade and output declines during 2009.

IMF reserves will receive a strong boost, of up to approximately $500 billion. This, together with other official support through regional development banks behind the IMF, will ensure that IMF will not be overwhelmed by countries requiring financial assistance. This is especially important for Eastern Europe and developing countries, as they have been most affected by capital flight and the withdrawal of commercial bank lending.

Each country will agree to provide a fiscal stimulus to support demand, the level of which will depend on their financial resources and previous fiscal commitments. Governments will promise that more will be done if the stimulus does not produce a material impact this year.

Fixing the banking system is recognized as absolutely necessary before we can expect any kind of sustainable growth and resumption of commercial bank lending. While a global grand plan is unlikely to be agreed at the meeting, each country will commit to resolving the bad debts held by banks that are choking credit flows. Some banks will have to be recapitalized so that they are able and willing to lend again and restart credit flows to support new economic growth.

Bank secrecy in tax havens will be renounced by G20. Offshore financial centers such as Switzerland, Liechtenstein, Andorra, as well as many Caribbean islands, will have to comply with OECD rules regarding the exchange of cross border information by tax authorities regarding their own residents/citizens. For the first time, there is an alignment of government interests between the English-speaking countries and the continental Europeans over tax havens and bank secrecy as every government's budget comes under intense pressure as tax revenues fall away under recession.

The IMF's functions may be expanded to include regulatory oversight for the international financial system. Governments may do this in conjunction with the BIS (Bank for International Settlements - the Central Bankers' Central Bank) and the new / EU / US financial regulatory bodies currently emerging. The US and UK will accept that the shadow banking system (hedge funds, private equity, quasi-banks) will have to come under regulatory oversight if they pose systemic risk. This change is the result of pressure from Germany and France.

Also, the multi-trillion dollar financial derivatives markets, which have seen massive expansion in recent years, will become subject to official oversight. This may mean requiring derivative contracts to be settled in central exchanges where they can be better monitored by the regulators for any systemic risks they may pose.

Richer countries will agree to maintain their commitments to provide aid flows to developing countries, as these are most vulnerable to the current collapse in trade, capital flows, commodity prices and external demand. IMF resources will be beefed up at the summit. While there won't be an explicit bailout package, IMF resources will be boosted so that it can expand lending to developing countries under existing lending windows. This will include advance IMF contingency funds for sounder countries.

There may be some commitment to raise SDRs, special drawing rights -- a currency issued by the IMF to member governments that can be used to settle international debt. This would increase liquidity and could allow emerging market countries to borrow SDRs from richer IMF member countries to supplement their cash reserves. The G20 may look at ways in which the IMF and other official bodies (e.g., the World Bank) can provide sovereign guarantees and direct finance to resurrect the collapse in commercial bank trade finance.

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