In a recently published Working Paper, Professor Ugo Panizza of the Graduate Institute's Centre for Finance and Development and Professor Mitu Gulati of Duke Law School study the so-called Odious Debt Problem and investigate different proposals to solve it.

Scholars in many fields have struggled for over a century to establish a legal doctrine of Odious Debts. These efforts have not gone anywhere mostly because it is difficult to build international consensus on the definition of a despotic regime and because many powerful countries still view some dictatorship using the philosophy that: “He may be a son of a bitch, but he's our son of a bitch.”

The doctrine of state succession requires that governments honour the international commitments of their predecessors. Even if a dictator borrows to oppress his own citizens, future generations are required to service the debts and commitments contracted by the dictator. The paper starts by briefly describing possible exceptions to this doctrine by focusing on war and hostile debts. Next, Gulati and Panizza review the literature on odious debt and discuss two proposals that could address this issue by using domestic legal principles. According to the authors, these proposals could have effects similar to those that are sought by odious debt activists but do not require international consensus because they could be implemented by non-governmental organizations leveraging existing national law.

The paper is published as Working Paper No. HEIDWP02-2020 in the International Economics Department's Working Paper Series.

Discover the entire Working Paper Series of the International Economics Department at the Graduate Institute of International and Development Studies

Read our other recent articles related to public debt:

• Finance & Development Expertise: Debt Sustainability in Africa with Ugo Panizza

• Finance & Development Expertise: Public debt and private investment with Ugo Panizza, Yi Huang and Richard Varghese