When should debts not be repaid?


Loans can be a useful way for a lender to share resources and enable investment that allows the loan to be repaid. However, lenders can knowingly lend money for a bad project, or changes in circumstance can mean the project fails. In such cases, it is only fair that the lender shares in this cost, rather than all of the burden being put on those who have borrowed the money, whether it is a country or an individual. This happens all the time with private companies but should also apply to governments.

In addition, debts can be illegitimate if the people paying them did not have a say in the decision to take them out and/or were harmed by what the loans enabled. For example, the UK government lent the Indonesian dictatorship of General Suharto money to buy tanks and warplanes that were then used to violently repress Indonesia’s own people. After the dictatorship fell, the UK insisted that the Indonesian people continue to pay back the debt.

Finally, if there has to be a choice between repaying debt to a rich lender and meeting basic needs such as food, water, shelter, or basic services such as healthcare, it can only be right for the money to be spent on protecting human rights and providing for basic needs. Otherwise, debt is being prioritised over life itself.

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  • Fernando Petroli
    published this page in FAQs 2021-09-07 16:12:06 +0200