UK announces partnerships with Africa and Caribbean to help manage debt and deal with climate crises
The UK has today June 22, 2023 announced 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 Andrew Mitchell 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 Andrew Mitchell 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, Andrew Mitchell, 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.
Source: Ghana Business
