Abstract:
The IMF and World Bank emphasize that countries seeking external loans
should conduct detailed assessments of their ability to repay these loans. The case of
Hambantota Port in Sri Lanka highlights a lack of such assessments before securing
loans from China, leading to the country defaulting in 2017. The Responsible
Sovereign Lending and Borrowing Concept by Buccheti and Gulati is used to
analyze this issue, focusing on realistic assessment, honesty, inheritance to future
generations, and pre-disbursement diligence. The absence of a realistic assessment is
evident in Sri Lanka’s debt-to-GDP ratio preceding the loan agreement in 2007,
indicating a lack of consideration for repayment capabilities. Transparency issues
arose, revealing corruption and violations in economic activities, especially
concerning the Hambantota Port Project. Despite defaulting, Sri Lanka still grapples
with economic challenges and debt repayment struggles, burdening future
generations. Concerning pre-disbursement diligence, the project exacerbated
environmental and human rights impacts. Thousands were evicted, habitats like Sri
Lanka’s lagoon were harmed, and rare wildlife suffered due to the port’s
construction. This reflects irresponsible lending and borrowing practices. In close,
the Hambantota Port loans lacked critical assessments, transparency, consideration
for future generations, and due diligence.
