Australia to offer debt relief for climate-hit nations

From next year Australia will start offering natural-disaster-hit countries the chance to pause debt repayments in a bid to help stabilise climate-vulnerable Pacific neighbours.

Australia's Foreign Affairs Department told AFP that "climate resilient debt clauses" would be offered on sovereign loan deals "by the end of 2025".

"These clauses will help small and vulnerable countries build economic resilience, allowing them to pause debt repayments in the event of disasters," a spokesperson said.

"Australia is committed to addressing climate change by taking action to support climate-vulnerable countries in our region."

These types of clauses have become popular in recent years, with bilateral and multilateral lenders seeking to reduce the stress on smaller countries that are often already struggling to repay their debt.

Last year, several bilateral and multilateral lenders -- including the World Bank and Inter-American Development Bank -- announced they would roll out the clause in their loans.

There are 44 countries eligible for the World Bank's clause in the case of natural disasters, and many are Australia's neighbours, including Vanuatu, Nauru, Kiribati and Fiji.

Australia is one of the largest donors and lenders to the climate-vulnerable South Pacific, where many nations also face dire fiscal pressures.

In recent years China has been offering more loans and investment into the region.

Last year, Britain announced its first climate-related debt clause with Senegal and Guyana, and is working to extend the offer to a further 10 countries.