Thread by @kira_mustapha

1/6 Debt pause clauses for climate shocks is one of the most likely innovations expected to take off from this week’s Paris Summit (one of the asks of the #BridgetownInitiative and not as expensive as other reforms on the table). But a few important caveats @CentreForDP 🧵👇

2/6 Supply- potential liquidity relief created depends on who offer them: MDBs, official bilateral and/or private creditors. While the official sector is expected to initially lead the way, combined efforts of ALL external creditors is key for these clauses to have most impact.

3/6 Demand- Even if creditors offer these clauses, all borrowers are unlikely to automatically want them. Need to understand factors affecting demand and to support countries in assessing pros & cons given their context: debt composition, access to capital mkts, macro situation..

4/6 Money out/boring PFM stuff matters A LOT- Money-in mechanisms should not distract attention from whether countries have systems to ensure that pre-agreed funding get to those who need it most. Having a plan based on best practices transplanted from elsewhere is insufficient.

5/6 Concept of risk layering is key- these clauses, which to date have been designed to be triggered 1-3 times is not useful for all disasters. Their relative cost effectiveness vs. other options vary according to the frequency-severity profile of the underlying risk targeted.

6/6 Triggers- While there may be scope to piggyback on existing ‘hard’ triggers (discussed in CDP’s paper), these triggers aren’t available everywhere and for everything. But that need not be a limitation. Well designed 'soft triggers' are often feasible and should be explored.