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.
Read moreEx ante
Actions, decisions or financial arrangements made before a disaster or crisis occurs.
Sovereign insurance
Sovereign insurance is insurance coverage purchased by a national government to protect its budget against the financial impacts of disasters.
Pre-arranged financing
Financing approved before crises that is released automatically when agreed triggers are met.
Covariate shocks
Shocks affecting many households at once where losses are shared across the same community.
Other official flows (OOF)
Public funding supporting development that does not meet official aid definitions.
Disaster risk financing
Financial arrangements made in advance to pay for disaster prevention, response and recovery.
