Climate resilient debt clause or 'debt pause clause'
A pause clause is a provision in sovereign debt contracts that enables the borrower to temporarily stop repaying debt service (interest, principal or both) for a pre-agreed period when a predefined event occurs. These built-in debt deferrals can be designed to be Net Present Value (NPV) neutral and not extend the instrument’s original maturity date. Also known as Climate Resilient Debt Clause or Natural Disaster Clause (Centre for Disaster Protection).
A practical note on Debt Pause Clauses, the first of a series of documents designed to help governments and practitioners understand and compare financial instruments.
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This policy brief examines the first real-world use of debt pause clauses - contractual mechanisms that allow sovereign borrowers to temporarily defer debt payments in the wake of a disaster.
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This report offers an in-depth assessment of pre-arranged financing tools using seven key criteria for ensuring pre-arranged financing reduces the human and financial costs of disasters
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Analysing the level of effort of international development donors to support a shift towards arranging financing for disasters, before shocks happen.
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This insight paper provides an overview of the key features of debt pause clauses, also known as climate resilient debt clauses.
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A predefined threshold that activates payments or actions within risk financing mechanisms.
Development bank
A public financial institution providing loans, grants and expertise to support development goals.
Anticipatory Action
Actions taken before a crisis hits to prevent or reduce potential disaster impacts prior to a shock or before acute impacts are felt.
Financial Flows
Financial flows refer to the movement of funds for disaster risk reduction (DRR) and response, covering planned and unplanned sources.
Crisis
A situation where severe needs overwhelm local and national capacity to respond effectively.
Shock-responsive social protection
Social protection systems adapted to scale quickly when large shocks affect many people.
