A much needed glimmer of light has emerged amidst some gloomy recent observations about the number of sovereign borrowers who are struggling to service their debts.

The World Bank announced at a climate conference in Paris yesterday that it will insert debt relief clauses in new loans to developing countries, starting with the most impoverished nations. The idea is to hardwire into the documents a right for sovereign borrowers to defer debt repayments in the case of hardship caused by a climate disaster.

UK Export Finance has indicated that it will offer similar clauses, and it is likely that other export credit agencies will follow suit.

On the face of it, these clauses will be a welcome relief to some sovereign borrowers. When climate disasters strike, they will be able to focus their efforts (and money) in dealing with the consequences, and will get breathing space in servicing their sovereign loans.

However, as is often the case, the devil is in the detail. At present, in the case of a climate disaster, a sovereign borrower would need to approach the lenders and seek consent for a deferral (an "ad hoc deferral"). While that approach may be difficult and time-consuming, lenders will often agree to the deferral. One of the advantages of ad hoc deferrals is that, as part of the process, the contractual terms can be flexed in order to address the particular circumstances at the time.

Whilst the World Bank proposals give sovereign borrowers comfort that the deferral right is "baked in" to the document, those deferral terms are fixed at the outset, and do not take into account the particular situation which arises from a climate disaster.

Sovereigns will need to decide whether to accept the proposed deferral terms (noting that they will not work perfectly in every circumstance), or continue to rely on ad hoc deferrals when climate disasters occur.

Even though the World Bank proposals fall short of the debt forgiveness that some poor countries are demanding, they give some much needed breathing space to sovereigns.