Dhaka: Countries significantly impacted by extreme weather should have a repayment holiday on government loans and bonds, a Commonwealth report has recommended.

'Countercyclical Financial Instruments: Building Fiscal Resilience to Exogenous Shocks' examined the merits of these so-called countercyclical instruments which include provisions for natural disasters in loans and bonds.

The report examined Grenada's recent debt restructuring agreement, which includes a hurricane clause, according to Commonwealth Secretariat.

It argues that countries should be given time to recover from natural disasters without having to worry about servicing debt.

‘This week hurricane Matthew is wreaking havoc in the Caribbean, and we see the impact of the increase in frequency and intensity of these climatic events,’ said Commonwealth economic expert Heidi Tavakoli.  

‘This highlights the need to support countries to create strong disaster risk management strategies, backed by sound financing,’ he said.

‘Financial instruments that build in repayment holidays and insurance policies can make all the difference to a country recovering from a disaster. It gives them much needed breathing space to focus on recovery and the reconstruction of their infrastructure.’

Commonwealth finance ministers at their annual summit in Washington examined three important policy papers on the issue.

They will also explore the possibility of expanding applications of these financial provisions to economic shocks, such as the recent global recession.

‘We are hoping that ministers can learn from the examples we have provided and explore next steps for making this a reality for vulnerable countries across the Commonwealth,’ said the expert.