Climate Resilient Debt Clause (CRDC)

PRODUCT NOTE

Introducing a clause to defer principal and interest payments, and other loan charges to the IBRD Flexible Loan and IDA
credits in case of certain natural disasters.

Highlights•••

Only for small states and small island
economies
Defers principal and interest payments ofIBRD loans and IDA credits for up to 2 years
in case of certain natural disasters
Coverage for tropical cyclones/hurricanes
and earthquakes

Supporting vulnerable countries against economic shocks,
including fiscal crises due to natural disasters, is an important
objective for the World Bank. Going forward, borrowers may
choose to include in their IBRD loans and IDA credits
contractual provisions (CRDC) that permit the borrower todefer principal and/or interest payments of the loan for up to2 years, following the occurrence of a pre-specified naturaldisaster. This in turn will free up government resources tofinance disaster response and recovery efforts.
Eligibility: CRDCs will be offered to IBRD and IDA-eligible
Small State Economies, members of Small States Forum andSmall Island Developing States as defined by the UN (See page
2 for the current list of eligible countries) for new loans, andexisting loans with a remaining repayment period higher than
five years. The feature may be activated once per loan life.
Borrowers electing to amend their existing loan agreements
must not be undergoing a debt restructuring with other
lenders at the time of the amendment.
Covered Disasters: Event coverage will be limited to tropical
cyclones/hurricanes and earthquakes.
Event Triggers:• Tropical cyclones/hurricanes: The reported maximum
sustained windspeed must meet 178km/hour if reported as1-min average windspeed; or 160km/hour if reported as 10min average windspeed, which is approximately equivalent
to a Category 3 Hurricane in the North Atlantic Basin.
• Earthquakes: The reported moment magnitude (Mw9) must
be greater than or equal to 7.0 Moment Magnitude; and thereported depth less than or equal to 175km.
• If the above-outlined hard primary triggers are not met, yet
the damage is significant (greater than or equal to 10 percentof the country’s GDP) the secondary trigger will be evaluated.
The assessment of damages will be based on the WorldBank’s Global Rapid Post-Disaster Damage Estimation(GRADE) approach.

Climate Resilient Debt Clause (CRDC) Note

Activation of Deferral:• Borrower will declare a national emergency following theextreme natural disaster event defined in the eligible events
for CRDC, and submit a request to the World Bank to exercise
the payment deferral. The borrower must be current on its
World Bank loan payments at the time of deferral request.
• The World Bank will verify whether the natural disastermeets the relevant thresholds for a parametric trigger andthe secondary trigger of damage significance (if primary
trigger is not met). If the conditions are met, the Bank will
activate the CRDC.
Deferral duration: Deferral of principal, and/or interest
payments and other loan charges for a period of up to 2 years
may be made, once per loan life, at any time from the first
regularly scheduled loan payment until the date falling 5 years
prior to the final loan repayment.
If not included in thedeferral election, the borrower will continue to service interest
and charges under the loan.
Adjustments to repayment after the deferral: After thedeferral period, the borrower will restart payments of thedeferred amounts according to a modified amortization
schedule that maintains the (original) average weighted
maturity of the loan, and does not extend the final maturity
date of the loan. Within these parameters, the borrower has
the flexibility to tailor, within the original financial terms, thepayments of the deferred amounts to suit their debt
management needs and as agreed with the Bank. If theborrower decides to defer interest and other loan charges, thenew balance will accrue interest.
Fees: The CRDC is offered to eligible borrowers at no cost tothem.
Availability of conversion options: Borrowers who included
a CRDC in their loan will have access to the regular conversion
options provided to World Bank clients, such as interest rateand currency conversions, and interest rate caps/collars. If aborrower has an existing conversion in a loan with a CRDC at
the time of the deferral activation, the conversion may need to
be terminated early or amended, which might result in
additional costs to the borrower, and any such costs would not
be deferred.

Updated June 2024

PRODUCT NOTE
List of countries Currently Eligible for CRDCs (including current borrowing terms) 5.24.2024

Countries Currently Classified as Small States by World BankCountry
World Bank Eligibility
Antigua and Barbuda
IBRD-only
Belize
IBRD-only
BhutanGap
Cabo Verde
Blend
Comoros
IDA-only
Djibouti
Gap
Dominica
Blend
Eswatini
IBRD-only
FijiBlend
GrenadaBlend
GuyanaGap
Kiribati
IDA-only
Maldives
IDA-only
Marshall Islands
IDA-only
Mauritius
IBRD-only
Micronesia, Fed. Sts. Of
IDA-onlyMontenegro
IBRD-only
Nauru
IBRD-only
PalauIBRD-only
Samoa, Independent State of
IDA-only
Sao Tome and Principe
IDA-only
Seychelles
IBRD-only
Solomon Islands
IDA-only
St. Kitts and Nevis
IBRD-only
St. Lucia
Blend
St. Vincent and the Grenadines
Blend*Member of SSF

Countries Currently Classified as Small States by World BankCountry
World Bank Eligibility
Suriname
IBRD-only
Timor-Leste
Blend
Tonga
IDA-only
Tuvalu
IDA-only
Vanuatu
IDA-onlyCountries not currently Classified as Small States by World Bank (but part of
SSF/SIDS)Country
Barbados* †Botswana*
Equatorial Guinea*
Gabon*
Gambia, The*
Guinea-Bissau* †Lesotho*Namibia*Jamaica* †Trinidad and Tobago* †Dominican Republic†
Haiti†
Papua New Guinea†

World Bank Eligibility
IBRD-only
IBRD-only
IBRD-only
IBRD-only
IDA-only
IDA-only
Gap
IBRD-only
IBRD-only
IBRD-only
IBRD-only
Gap
Blend

IBRD Graduates with Current Outstanding Exposure
Country
Bahamas, The* †† Classified as SIDS

Annex 2: Illustrative Borrower Repayments with CRDC

In this illustrative case, borrower a loan with CRDC and an eligible natural disaster occurs that meets the trigger criteria. The principal (andinterest) deferral is exercised for years 8 and 9, the borrower could defer the $7 million principal repayment per the original amortization andthe $5 million interest payments p.a. scheduled per the outstanding balance. To achieve PV neutrality and maintain the loan’s original weighted
average maturity of about 13 years, the loan payments post-deferral would be repaid over a shorter timeframe (by 18 years of the remaining
maturity instead of the original 20 due to the 2-year deferral period). As the second chart below demonstrates, the loan’s outstanding balance,
once the deferral is exercised, would increase not just by the principal payments deferred, but also the $10 million deferred interest payments
over the 2 years, which will incur the regular loan interest (at 6%).

Contact: Miguel Navarro-Martin, Manager, Financial Products & Client Solutions, The World Bank Treasury
 mnavarromartin@worldbank.org  +1 (202) 458 4722 1225 Connecticut Avenue NW, Washington, D.C., 20433, U.S.A.

Climate Resilient Debt Clause (CRDC) Note

Updated June 2024