Odious Debt

Definition

In international law, odious debt, also known as illegitimate debt, is a legal theory that says that the national debt incurred by a despotic regime should not be enforceable. Such debts are, thus, considered by this doctrine to be personal debts of the regime that incurred them and not debts of the state. In some respects, the concept is analogous to the invalidity of contracts signed under coercion.


Odious Debt

What is ‘Odious Debt’

Money borrowed by one country from another country and then misappropriated by national rulers. A nation’s debt becomes odious debt when government leaders use borrowed funds in ways that don’t benefit or even oppress citizens. Some legal scholars argue that successor governments should not be held accountable for odious debt incurred by earlier regimes, but there is no consensus on how odious debt should actually be treated. In practice, countries often end up repaying it to uphold their ability to borrow at favorable interest rates.

Explaining ‘Odious Debt’

Legal scholars have identified regimes associated with odious debt in Nicaragua, the Philippines, Haiti, South Africa, Congo, Niger, Croatia and other countries whose rulers have looted national funds for their personal accounts or used the money to restrict liberties and inflict violence on their own citizens. In the European debt crisis of the early 2010s, some critics called Greek’s debt odious.

Further Reading