This article contains references to violence and sexual abuse.
Canada is setting aside C$40 billion ($43.8 billion) to compensate Indigenous children and families in foster care for suffering discrimination, and will start paying out once a protracted lawsuit is settled, officials said on Monday.
The compensation decision affects some 55,000 children.
The Canadian Human Rights Tribunal ruled in 2016 that the federal government allocated fewer funds for child and family services of Indigenous people than for others, pushing more Indigenous children into foster care.
"The government of Canada is provisioning C$40 billion to provide compensation and to commit the funds necessary to implement long-term reform so that future generations of First Nations children will never face the same systemic tragedies," Indigenous Services Minister Patty Hajdu said.
In October, the government appealed the tribunal's 2019 follow-up order that Ottawa pay each affected child C$40,000 ($43,859). But it said on Monday it would pause the appeal while engaging in talks with the initial complainants.
"We have made considerable progress ... Our discussions remain progressive and productive," Ms Hajdu said in a statement.
Indigenous advocacy group Native Women's Association of Canada (NWA) has welcomed the progress.
"We remain cautiously optimistic that fair compensation will be given to the children unnecessarily taken into foster care, and their families," the NWA said on Twitter.
The government's legal strategy came under increased scrutiny this year after hundreds of unmarked graves were discovered at one of the largest former residential schools, the Catholic-run Kamloops Indian Residential School.
Officials confirmed 215 bodies were found that had not been previously identified or recorded, renewing an outcry for justice for Canada's First Nations people.
Until as recently as 1996, Canada's residential school system separated Indigenous children from their families and sent them to boarding schools where they were malnourished, beaten and sexually abused.
In 2015, Canada's truth and reconciliation commission released a report outlining the harrowing experiences under the residential school system amounted to "cultural genocide".
Canada's Prime Minister Justin Trudeau welcomed all 94 recommendations of the final report that aimed to encourage further reconciliation between non-Indigenous Canadians and Indigenous people.
One of the recommendations included a visit from Pope Francis to Canada's former schools to issue a papal apology to the country's Indigenous people.
The Pope has indicated a willingness to visit, with a plan tentatively scheduled for 2022.
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