Odious Debt

This chapter discusses the problem of illegitimate debt from a new angle. Instead of focusing on borrowers, it focuses on the role and incentives of creditors who lend to questionable governments for illicit purposes. This approach follows a theme that runs throughout the book: responsibility for bad loans should lie with lenders as much as borrowers. It is argued that as long as borrowing countries are obligated to repay bad debts, lenders will have no incentive to avoid bad loans. Furthermore, once a loan is made to an odious regime, no tribunal can be entrusted to label it as such, and charges of favoritism will always be made against the tribuna's decision.