· UK will today (22 June)
announce new partnerships with developing countries to support
their economic resilience in the wake of climate crises.
· The UK’s export credit
agency UK Export Finance (UKEF) will work with twelve partner
countries in Africa and the Caribbean to allow them to defer debt
repayments if they are hit by climate catastrophes, such as
hurricanes or floods.
· The announcement comes as
UK Minister for Development and Africa represents the UK at the
Summit for a New Global Financing Pact in Paris.
Speaking at the Summit for a New Global Financing Pact in Paris
today (22 June), UK Minister for Development and Africa will announce that UKEF has
started discussions with 12 partner countries in Africa and the
Caribbean to add Climate Resilient Debt Clauses (CRDCs) to its
new and existing loan agreements.
The Clauses allow governments to delay their debt repayments and
free up resources to fund disaster response and recovery, with
the first UK-led CRDCs expected to go live in the coming
months.
This follows the UK’s announcement at COP27 that UKEF would
become the first export credit agency globally to offer CRDCs in
its direct lending to low-income countries and small island
developing states. UKEF has a £2 billion direct lending facility
dedicated to financing clean growth projects overseas.
The Summit, chaired by President Macron, aims to build a new
consensus for a more inclusive international financial system,
with a view to addressing global poverty and climate change, and
reinvigorating progress towards achieving the United Nations’
Sustainable Development Goals. The UK is focused on ensuring
the Summit delivers for low-income
countries.
Minister for Development and Africa, , said:
“Developing countries face painful trade-offs between
rebuilding their communities and making debt repayments in the
wake of climate shocks.
“The partnerships with Africa and the Caribbean I’m
announcing today are a milestone towards reducing these
pressures, with Climate Resilient Debt Clauses providing relief
for those countries hit hardest by extreme weather
events.
“Allowing for a temporary pause in debt repayment is
important because it gives affected communities the breathing
space they need to focus on the urgent task at hand:
recovery.
“I’m proud that the UK is leading an international coalition
committed to strengthening the resilience of vulnerable countries
in responding to climate catastrophes, and I strongly urge more
of our partners to follow suit.”
The UK is leading the call for international creditors to offer
CRDCs. Chairing a side-event on ‘Building a More Shock Resilient
Financial System’, the Minister will call for lenders to follow
the UK’s lead. Minister Mitchell, together with France and
Barbados, will issue a call to action for all bilateral,
multilateral and private lenders to offer CRDCs by the end of
2025, with early movers offering CRDCs by COP28 in November, so
that vulnerable countries can allocate resources towards
post-disaster recovery.
Prime Minister of Barbados, Mia Amor Mottley,
said:
“We commend the UK for its support and leadership in
developing these clauses into something that could transform the
resilience of the international financial system and make it
fitter for today’s world.”
At the side-event, the US is expected to mention that it is
preparing to offer CRDCs where feasible and France will set out
how it integrated CRDCs into recent lending agreements.
Furthermore, under the leadership of the Inter-American
Development Bank, nine Multilateral Development Banks (MDBs) will
work together to explore offering CRDCs. Further partners are
also expected to announce that they will pilot CRDCs.
UKEF will publish its template clause, which it now offers as
standard in all its loan agreements with eligible countries, to
help inform the work of other official creditors in adopting
similar clauses.
Tim Reid, CEO of UK Export Finance,
said:
“The release of our template Climate Resilient Debt Clause is
a watershed moment for the UK’s work in encouraging other
creditors to consider similar provisions. With this, the UK
continues showing its commitment to helping those countries most
vulnerable to climate shocks respond to crises and
disasters.”
Minister Mitchell is also due to announce that the UK stands
ready to support further interested countries to explore CRDCs
through the UK-funded Centre for Disaster Protection and
Financial Sector Deepening Africa. This will include sharing best
practice advice on debt clauses, innovations on climate and debt,
and potential triggers, as well as quality assurance.
