Odious Debts

The Third World's Odious Debt

The South makes compelling moral arguments to cancel its foreign debts. But, it also has an indisputable legal case because the overwhelming majority of those debts are odious in law.

"If a despotic power incurs a debt not for the needs or in the interest of the State, but to strengthen its despotic regime, to repress the population that fights against it, etc., this debt is odious for the population of all the State."

- Alexander Sack, 1927

In 1927, Alexander Sack the world's pre-eminent legal scholar on public debts, defined the Doctrine of Odious Debts, which remains the ultimate legal source on that subject. The Doctrine of Odious Debts, though now 70 years old, helps bring clarity to today's complicated Third World debt situation, and fairness to a tragedy in which innocent Southern citizens pay, and corrupt and negligent borrowers and lenders get away scot-free.

Odious debts campaigns

Australia
Jubilee Australia education kit by Jubilee Australia. Patricia Adams Odious Debts: Loose Lending, Corruption, and the Third World's Environmental Legacy (Earthscan: Toronto, 1991) is the key introductory text. March 1/2001

Canada
In Canada, Probe International launched the debate over odious debts in 1991 with the publication of Odious Debts: Loose Lending, Corruption, and the Third World's Environmental Legacy. More recently, the Canadian Ecumenical Jubilee Initiative adopted the cause by arguing that part of the poor countries' debts are odious. The Canadian Ecumenical Jubilee Initiative has collected 635,000 signatures on petitions to the Canadian government.

Export credit agencies
Numerous non-governmental organizations have accused ECAs of financing environmental destruction and supporting widespread corruption in the third world. Over the past several years, international NGOs have developed influential campaigns calling for export credit reform. Given that ECAs account for 24 percent of all developing country debt, NGO campaigns such as the Jakarta Declaration can be a powerful force in the struggle to challenge the legitimacy of third world debt.

Germany
The German branch of the worldwide Jubilee movement for international debt cancellation. The network of currently more than 800 institutional members urges national and international creditors to write off Southern countries' debts to a truly sustainable level and to reform international debt management towards an internationalinsolvency framework.

Indonesia
Civil society organizations and NGOs are calling for the cancellation of Indonesia's international debt. Organizations such as the Anti-Debt Coalition question the morality of expecting the Indonesian to people bear a debt burden incurred by a corrupt and repressive authoritarian regime.

Iraq
Iraq's oil fields are in disrepair while its debt has increased – and it also faces immense Gulf War reparations for the damage it inflicted on Kuwait and its oil fields. To become solvent and a model for responsible government in the Middle East, to be credible with its own oppressed populations, which will not want to be taxed to repay the regimes that armed Saddam against them, a successor Iraqi government will need to shed debt as well as restore oil production.

Lesotho
A government official has been tried in Lesotho and found guilty of bribery. The former chief executive of the Lesotho Highlands Water Project accepted bribes from some of world's largest international construction and consulting consortiums in exchange for contracts for the World Bank financed dam project. A guilty verdict now tests the Bank's resolve to implement its policy of barring corrupt companies from bidding on World Bank projects. The case is also significant because all of the companies listed in the indictment are from countries that have ratified the OECD Convention on Corruption and Bribery. Thus, the trial tests the political will of these governments to take action against their own companies for corruption. Most importantly, the trial may open the door for the government of Lesotho to challenge the legitimacy of loans tainted by corruption.

Nigeria
In Nigeria, the newly elected government of President Olusegun Obasanjo has called at least half of Nigeria's debt "dubious" when "the people who gave those loans knew that the money wasn't being spent wisely. Perhaps they even took their own cut." The new government has taken steps to recover some of the stolen money "stashed away" in foreign banks.

South Africa
In South Africa, the Alternative Information and Development Centre started the debate over the legitimacy of the debts incurred by the apartheid regime when they published their book Challenging Apartheid's Foreign Debts in 1997. The Truth and Reconciliation Commission recommended that "responsibility for the repayment of the previous government's ‘odious debt' be critically considered". And Desmond Tutu's successor, Archbishop Njongonkulu Ndungane of Cape Town, now argues that South Africa's foreign debts were largely incurred under the apartheid regime to suppress the majority population and should be declared odious and written off.

U.K.
The global ecumenical Jubilee movement, which began in the UK, has researched and publicized the concept of odious debts. Petitioners to the Jubilee cause, which calls for cancellation of the unpayable debt of the world's poorest countries under a fair and transparent process, now number 17 million. See the Jubilee + web site for interesting analysis and explanations of odious debts.