UK-backed debt coalition to push wider use of payment pause clauses

By Libby George

LONDON, Sept 11 (Reuters) - A UK-backed coalition seeking to improve debt sustainability in developing countries said it would push for the use of its newly designed debt pause clauses and its playbook for restructuring private loans a year after its launch by the British government.

The British government launched the London Coalition on Sustainable Sovereign Debt to bring together governments and the private sector to make such debt more manageable and preserve access to private investment.

The push comes ahead of Britain's 2027 G20 presidency, which is typically the forum for advancing reforms to global sovereign debt.

Its two main initiatives have been an implementation guide for countries restructuring private-sector sovereign loans and a proposal for debt pause clauses, which would allow countries to suspend debt payments for up to a year during crises ranging from floods to pandemics.

"The next phase is about uptake: using the Implementation Guide as a common reference in live cases, and building on the work already done on pause clauses so that standardised deferral features can be considered in routine issuance planning," the group said in its first annual report.

Private debt not held in bonds can account for a significant share of a country's liabilities, but is often dealt with later in restructuring talks.

In Ghana and Zambia, negotiations over private loans lagged behind bond restructurings, highlighting the need for a clearer framework, debt experts say.

Senegal's planned debt treatment, announced last week, could provide an early test of those efforts.

While several countries already use debt pause clauses — notably island states such as Barbados and Grenada — the Coalition wants to broaden triggers to include any major economic shock.

The group said the aim is to "create a predictable, rules-based way to provide short-term breathing space in circumstances such as severe natural disasters, health emergencies, conflict or major external economic dislocations."

The report also included the coalition's most comprehensive participant list to date, including the African Union, the governments of South Africa and Canada, JPMorgan, law firms Clifford Chance and White & Case, and asset managers such as Amundi and Federated Hermes.

(Reporting by Libby George; Editing by Karin Strohecker and Hugh Lawson)