18 C E N T E R F O R WO M E N ' S G LO B A L L E A D E R S H I P Finally, the sustainability of the debt depends on how well the tax system is functioning and in which currencies the debt is denominated. Borrowing is no substitute for a strong set of domestic tax institutions and the exchange rate has a direct effect on the cost of servicing the debt when that debt is denominated in a foreign currency. Distributive Implications of Borrowing Generally, interest payments on the debt go to those who own the bonds. Ownership is highly concentrated; therefore, debt servicing payments often represent a regressive transfer of income to wealthier segments of the global economy. Committing to large debt payments involves future transfers from the government to wealth holders. If the government has to tax low-income and middle class households to pay this interest, then there is redistribution from the poor to the rich. These regressive impacts need to be brought into the analysis, and might suggest the need for alternative policies, through progressive taxation for example. National Debt Audit to Determine What Is Onerous, Odious, and Illegitimate Debt The concepts of onerous, odious and illegitimate debt 22 provide tools with which to analyze the implications of accumulated debt. Onerous debt generally refers to a situation in which the obligations attached to the debt—for example, debt servicing payments—significantly exceed the benefits which were derived from taking on the debt. In these circumstances, the cost of servicing the debt can greatly limit the ability of the state to progressively realize rights. Odious and illegitimate debt refer to situations in which the national debt was incurred by a regime for purposes that do not serve the interests of the nation, e.g., the debt enriched economic elites or was used to finance war or repression. Again, sizeable debts which did not advance human rights compromise the ability of the state to make progress towards realizing those rights in the future. The creation of public debt audit commissions, such as the one created in Ecuador,23 provide an example of good practice in determining the legitimacy of a country’s current debt profile. Further, better financial regulation across jurisdictions to deal with these odious debts is required to recover those funds. Budget Deficits, Government Borrowing and Economic Crisis The sustainability of debt also very much depends on the creditors. Views and expectations of creditors can be volatile, especially in time of economic crisis. Austerity measures that some European governments have been forced to