What is “Odious debt”‘
Odious debt, also known as illegitimate debt, when the government appropriates the money which he borrowed from another country.
The nation debt is considered odious debt when government leaders use borrowed funds in ways that do not benefit its citizens, and Vice versa, often oppressed them. Some legal scholars argue that on moral grounds, these debts should not be repaid. Many see countries doing the lending must be, knew or should have known about oppressive conditions on the loan.
Some scientists also believe that the governments of the successor shall not be held responsible for odious debt that the previous regimes had been passed to them. However, international law is at odds with this concept, and holds the governments responsible for the debts of the regimes that preceded them.
Breaking down the ‘Odious debt’
Odious debt has occurred in the past regimes in Nicaragua, the Philippines, Haiti, South Africa, Congo, Niger, Croatia and other countries whose rulers were either looted national funds for their personal accounts or used the money to restrict liberties and inflict violence on their own citizens.
The idea of odious debt, first became famous after the Spanish-American war. The U.S. government claimed that Cuba should not be responsible for the debts of the Spanish colonial regime, the colonial rulers of Cuba. While Spain did not agree, Spain, Cuba, eventually was left with post-war debts.
The application of Odious debt
There is no single set of rules or guidelines in relation to odious debt, and sometimes the governments of the successor repaid the seemingly odious debt as needed. For example, the apartheid government in South Africa went all out to suppress the African majority in this country. Although many believe the huge debts of the odious apartheid government, the successor government, headed by President Nelson Mandela, who end up paying these debts, partially in an effort to show the new government’s willingness to pay, not to scare away much-needed foreign investment.
One of the potential moral harm to the marking of odious debt is that the government of a successor, some of which may have a lot in common with those that preceded them, can use the “odious debt” as a pretext to shirk obligations which they have to pay.
A potential solution to determine which debt is indeed odious, headed by economists Michael Kremer and Seema Jayachandran is that the international community may declare that all future contracts with a particular regime are odious. Therefore lending this mode, after such a decree could be in danger of the lender, as they will not be returned if the mode is later overthrown.