Canadian Prime Minister Justin Trudeau told Caribbean leaders on Wednesday that Canada will allow countries to suspend debt repayments in the event of a natural disaster.

In doing so, Canada joins other international lenders, such as the World Bank, which have agreed to incorporate climate clauses into new loan agreements with countries.

Trudeau announced the new debt clause at the Canada-Caribbean Summit in Ottawa, marking it as the first of its kind to be held in Canada and outside the Caribbean by the regional economic and political bloc.

During a session on climate change at the summit, Trudeau stated that Canada will now offer flexible climate debt clauses (CDRCs) in all sovereign lending. A temporary payment suspension will be applied to both loan principal and the interest itself.

The Bridgetown Initiative, a set of recommendations on debt relief, low-interest lending, and climate change promoted by Barbados Prime Minister Mia Mottley, has called for such climate clauses. This initiative has been adopted by the Caribbean group.

The Bridgetown Initiative calls for a comprehensive reform of the international financial system that dates back to World War II. Supporters of the new initiative stated that the system no longer serves countries that can have their economies devastated by hurricanes, forcing them to deal with both disaster relief and high-interest debt repayments simultaneously.

Mottley said, "We have made it clear that the one-size-fits-all prescription and the rules imposed on us are not of our making and cannot continue."

As with the debt conditions offered by the World Bank in June, Canada’s promise of a temporary suspension of repayments due to natural disasters will only apply to new loans.

The World Bank is an international financial institution that provides loans and grants to low- and middle-income countries. Canada was among the 188 countries that established the multilateral institution in 1944.

Mottley also pointed out that the debt repayment suspension promised by the World Bank only applies to the loan principal, not the interest. She stated that as a result, the relief clause provided by the World Bank offers little help to countries in crisis.

She added that instead of establishing conditions to suspend debts for all existing debts of vulnerable countries, we are now being told that they are likely to be future debts.

Many Caribbean islands were also hit by a tropical storm on Wednesday. The threat posed by the weather system led Dominica Prime Minister Roosevelt Skerrit to leave the summit ahead of schedule, despite playing a leading role in the meeting.

Mottley and others noted that natural disasters like this have exacerbated the debt crisis faced by countries in the region.

She also said that charitable organizations and multinational companies need to play their part to help the World Bank finance climate adaptation and other initiatives among developing countries, such as those in the Caribbean.

Mottley stated that governments alone cannot provide the funding that the World Bank requires to meet the current mission.

She said, "Until we have three sources of funding: public money, private sector capital... and philanthropy, we can then have an international bank that is scaled up to help meet the needs of the world."

Mottley proposed that this be done through a global mechanism, though she did not specify what this mechanism would be.