Odious Debt

Odious debt is debt incurred by a government or ruler that does not have the best interest of its people in mind. This term is most often used to refer to debt incurred by a dictator, but it can be used to refer to debt incurred by other governments, as well.

There is debate in the international community as to whether a country should be forced to pay off this kind of debt. On the one hand, the debts were incurred without the consent of the people in the country. As well, if it became known that debts incurred by dictators wouldn’t need to be paid off once that dictator was no longer in power, fewer people would be willing to lend money to a dictator, which would make that dictator less likely to stay in power, or to become rich at the expense of the people. On the other hand, who decides which debts are “odious”? Also, if a country does not pay its debts, then everyone who lent money to that country (whether an individual, a corporation like a bank, or another country) loses their money. Is it fair to make a country’s creditors accept the loss?

In 1898, Cuba ceased to be a colony of Spain. Cuba was in debt because of actions taken by the colonial rulers. The United States, which was an ally of Cuba, argued that Cuba should not be held responsible for these debts. In the end, Spain took on the responsibility for Cuba’s debts from while it was a colony of Spain.

This incident was the origin of the idea of "odious debt".
From 1979 until 2003, Iraq was ruled by a dictator, Saddam Hussein. During his rule, he spent large sums of money oppressing his people. He was also involved in several wars, which bankrupted Iraq further. By the time Hussein was deposed in 2003, his country owed around $130 billion to other countries. Some of these debts have been forgiven, such as a $7 billion debt owed to the United Arab Emirates, but Iraq’s debt remains high.
In the late 1970s and early 1980s, a nuclear power plant was built in the Philippines. The original contract cost $650 million, but it ended up costing $2.2 billion, with little information available as to why the costs had gone up. Some of the money may have ended up going to the Philippine president, who was accused of corruption and may have stolen up to $10 billion from his country. The Philippines have been in debt ever since. 

Bataan Nuclear Power Plant (Source: Wikimedia Commons)