Debt pause clauses confront their first disaster: From Hurricane Beryl to broader policy momentum

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. Following Hurricane Beryl in 2024, Grenada and St. Vincent and the Grenadines became the first countries to trigger these clauses, securing vital liquidity to support their crisis response. The brief explores how the clauses functioned in practice, their relationship with other financing instruments and offers critical guidance to improve how these instruments are designed, implemented and scaled as momentum builds toward broader adoption.

Based on the lessons learnt from Beryl, as well as the various unanswered questions in the report, the policy recommendations are:

1. Be fully transparent about the type of crises covered and the trigger structure
2. Strengthen borrower capacity for informed decision-making
3. Ensure MDBs assess value and integrate pause clauses with their other instruments
4. Clearly define and disclose rules around creditor veto rights
5. Agree and follow common principles that promote responsible design and use of debt pause clauses