When I first came upon this term on the Investopedia site, I thought maybe it was referring to bonds that had been sitting in safe so long they’d developed mildew. But I was wrong,
Instead, “Odious Debt” refers to money borrowed by one country from another country, which is then misappropriated by national rulers. A nation’s debt becomes odious debt when government leaders use borrowed funds in ways that don’t benefit or even oppress citizens. Some legal scholars argue that successor governments should not be held accountable for odious debt incurred by earlier regimes, but there is no consensus on how odious debt should actually be treated. In practice, countries often end up repaying it to uphold their ability to borrow at favorable interest rates.
Legal scholars have identified regimes associated with odious debt in Nicaragua, the Philippines, Haiti, South Africa, Congo, Niger, Croatia and other countries whose rulers have looted national funds for their personal accounts or used the money to restrict liberties and inflict violence on their own citizens. In the European debt crisis of the early 2010s, some critics called Greece’s debt odious.