AS THE negotiation between Bangladesh and the International Monetary Fund over the release of the fourth and fifth tranches of the $4.7 billion bailout package that the international lending agency approved in 2023 hangs over a few issues and the interim government has sought more concessional loans from other agencies, especially the Asian Development Bank, little attention has been given to the review of the external loans that the authoritarian Awami League regime took out, much of which was lost in corruption. Bangladesh鈥檚 gross external loan skyrocketed from $23 billion in 2008 to $103.4 billion in June 2024, making loan repayment increasingly heavier, with the highest single allocation in the budget already being loan repayment. The loans provided a lifeline for the Awami League regime, which engineered three national elections in 2014, 2018 and 2024 and assumed office illegitimately. The regime, which fell in August 2024 amid a mass uprising, indulged in gross rights violations and facilitated unbridled corruption. According to the white paper on the state of the economy that a committee formed by the interim government prepared, an average of $16 billion was illicitly syphoned off from Bangladesh every year during the Awami League regime.
As such, a large portion of the loans can, as economists say, be termed 鈥榦dious loans鈥�, which legally refers to debt 鈥榠ncurred by rulers who borrowed without the people鈥檚 consent and used the funds either to repress the people or for personal gain.鈥� The lending agencies, which well knew and often spoke of the mismanagement and misuse of the loans by the regime in the name of development, did not follow the norms of responsible lending, in violation of 鈥楶rinciples on Promoting Responsible Sovereign Lending and Borrowing鈥�, developed by the United Nations Conference on Trade and Development. There are precedents when countries have repudiated repaying odious loans, incurred without public consent and not used for public benefits. After the Spanish-American war, the United States argued that Cuba should not be liable for colonial debts. In 2003, the United States invoked the odious debt doctrine to cancel Iraq鈥檚 $125 billion debt, arguing that it hindered post-Saddam reconstruction. Other examples include the Soviet Union rejecting Tsarist debts, Germany repudiating Austrian debts in 1938 and cases like the 1923 Tinoco arbitration, 1919 Polish debts post Treaty of Versailles and the 1947 Peace Treaty with Italy. In the past few decades, a number of Latin American countries termed parts of their external loans odious and refused to repay. In some cases, international lenders had to cut lending to repressive regimes and cancel portions of loans.
Bangladesh should, therefore, review or request a UN-led independent commission to review all loan agreements of the corrupt and illegitimate Awami League regime and declare the dubious portion or the portion lost in corruption as odious. The lenders should also bear responsibility for their irresponsible lending to a repressive regime and cancel the odious portion of the loans.
