Sovereign Finance and the Poverty of Nations

Sovereign Finance and the Poverty of Nations

Odious Debt in International Law

Yvonne Wong

This important and timely book explains the legal principles and politics involved in the issue of odious debts, and sovereign debt arrangements more generally.

Introduction

Yvonne Wong

Subjects: development studies, law and development, law - academic, finance and banking law, international economic law, trade law, law and development, public international law

Extract

Every year for many years, we have been spending more than we earn. Every year, we have to borrow to make up the difference, so, each year, the debt gets bigger and bigger and each year we have to set aside more money to pay the interest on that debt . . . For the last ten years, all of the taxes we collect have had to be used to service that debt. So, before we can pay one teacher or nurse or policeman, before we can patch one pothole, before we can put one bottle of medicine in our hospitals or provide one school lunch for a needy child, we have to borrow more money, piling up the debt even further and the cost of servicing that debt even higher. (Prime Minister of Jamaica, Bruce Golding, January 13, 2010.) Debt in itself is not typically regarded as evil. Rather, it can be quite helpful – enabling you to delay repayment for luxuries enjoyed today, or to bring to life a business plan that otherwise you would not be fiscally capable of. But should you over-borrow and delay on repayments, then debt can quickly turn ugly – especially if your loan incorporates an interest component. Where debt obligations become too burdensome, you can seek relief, if you are an individual or corporation, through bankruptcy and insolvency regimes. But sovereigns that borrow are in a different position. In the sovereign debt context, the doctrine of pacta sunt servanda (pacts must be respected) reigns supreme. Other than...