At the UN Financing for Development Conference in Seville, the UK government has announced it is launching a coalition to develop “pre-arranged finance” for when countries are hit by disasters. The UK is also launching an alliance on debt-pause clause.
Reacting to the pre-arranged finance announcement, Tess Woolfenden, Policy Adviser at Debt Justice, said:
“Making money accessible to lower-income countries in times of crisis is essential, but it must not come at the cost of deepening debt burdens. Countries are already facing unsustainable debt burdens linked to climate and humanitarian disasters they did not cause. This money must come as grants, not loans, to avoid fueling a cycle of injustice and debt.”
Reacting to the debt-pause clause announcement, Tess Woolfenden said:
“Debt pause clauses may help in future crises, but they do nothing to address the crushing debt many lower-income countries are facing right now. The UK government must stop promoting inadequate gestures and instead take meaningful action by introducing a debt justice law that forces private creditors to take part in debt cancellation.”
Debt-pause clauses in contracts allow governments to suspend debt payments if they are hit by certain specified events, such as a natural disaster. But the paused payments must be paid with additional interest in the future.
The UK government has not clarified whether the pre-arranged finance will be grants or loans. When market-based collective insurance has been used for pre-arranged finance it has been more expensive than pooling funds from premiums and donations in a collective fund would have been.[1]
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