Odious Debt

“High levels of public debt have been a burden for impoverished countries for a long time. Economists agree that public goods and services – such as health care, roads, power grids or ports- are critical for activating an impoverished economy. In many of them this is not possible because the government is carrying the load of a huge debt, and the limited tax revenue is used almost entirely to service this debt. This is one of the components of the so-called “poverty trap”: When poverty is extreme, individuals don’t have the ability to save –all income is used for survival – and, therefore, there is no economic growth. Once nations are able to escape it, it is said that they step into the development ladder, in which is possible for it to grow and improve in a more independent way. Many development economists have theorized that policies of debt cancellation towards poor, heavily indebted countries have the potential to jumpstart growth in these nations. The International Monetary Fund (IMF), an organization dominated by wealthier countries, has opposed these policies. In this debate, however, is important to keep an old but often ignored concept in mind: odious (or illegitimate) debt”.

You can read the rest of my article for WUPR issue 20.1 “New Horizons” here (page 10)

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