Let's say you've just done a revolution and succesfully achieved independence/overthrew a country and established a new one - How does the debt of the old country factor in?

by BeholderOfBehold

Sorry if this is kinda a bad or poorly phrased question.

Let's say as a hypothetical, a coup in the USA happened and a new government was put in place. Like the Onion video, only an actual one and not a hilarious ruse. Would the new hypothetical "Octavia" actually get a free pass to dissolve the USA's debt?

Or, to go away from a funny Onion video example and onto real historical events, generally when a nation gets overthrown (Russian Empire, Nepal (does that count?)) or declares independence (South Sudan, Timor-Leste), what factor does the old country's debt have on the new country? Is it a case by case basis? Or is there a general "it stays/it goes away" factor? Are there any examples of revolutions that don't inherit the debt of the countries they overthrew, or in general do most successful revolutions end up getting wedged with the old country's debt anyway?

Kochevnik81

I touched on what happened to Russian tsarist-era debts in an answer I wrote here. The Bolsheviks repudiated the debt, but that didn't make it go away, and there were years of negotiations between the Soviet Union and other countries over the final status of those debts (and apparently there are still some French descendants of creditors pursuing legal cases against Russia).

u/kieslowskifan and u/terminus-trantor discuss the fate of Soviet and East German debt here.

In summary, I'd note that any government can repudiate payments on sovereign debt. Argentina did this in 2001. But a government repudiating debt doesn't mean its creditors consider it forgiven. Sometimes this doesn't matter, but if a government wants to borrow from those creditors in the future it usually needs to come to some sort of agreement on debt forgiveness.

For newly independent countries, it really depends on the terms of independence and whether the country is considered a legal successor of a previous country, so it is mostly a case-by-case basis. It usually involves larger questions of assets and liabilities: for example, Russia assumed all Soviet debt in 1991, but also assumed operational control of the Soviet nuclear arsenal and the Soviet seat on the UN Security Council, as well as Soviet ambassadorial properties. The other former Soviet republics thus began independence without Soviet debt...but also without those assets.