Odious Debt: Definition, Examples & Implications

"Odious debt" is a term that is used to describe debt that was accumulated by a country's government that does not serve the greater good of the country or promote it in any way. According to international law, when a debt is classified under this category, it is not enforceable by the party that loaned them the money.

Example of Odious Debt

If a dictator is in charge of a country and they borrow money from an outside entity in order to start a war or engage in some other negative activity, the debt is looked upon as the debt of the regime instead of the country's debt. 

Forgivable

The idea of odious debt can be a huge help to financially developing countries that cannot afford to repay the debts that were incurred by a previous regime. Instead of burdening the country, the debt can be forgiven and they can get back to business as usual. 

This concept goes along with the same principle that contracts which are signed under duress are not necessarily enforceable. The country itself was being oppressed by a leader that they did not necessarily agree with. Therefore, they should not be held responsible for the mistakes of the previous regime.