The political economy of Hambantota port: unveiling the realities of debt trap diplomacy and BRI vision

Abstract

ABSTRACT This paper aims to examine the political economy of the Hambantota Port project in the context of the Belt and Road Initiative (BRI) and how it was used (incorrectly) as a case study for Debt Trap Diplomacy (DTD). Our analysis shows that the port construction pre-dated the BRI and was a result of strong domestic electoral political incentives, not driven by the BRI. The Port lease, however, was motivated by domestic economic incentives as opposed to domestic political gains. Leasing Hambantota port to China was not a debt-equity swap and was a response to Sri Lanka’s external economic vulnerabilities and provided a short-term solution to foreign currency liquidity constraints and fiscal constraints. Although it was not driven by BRI plans, the port deal is portrayed as an example of DTD. We reconfirm the existing literature which argues that Hambantota port is not an example for DTD and provide documentary evidence to show that lease and loan were two different transactions and port lease was not an asset seizure. DTD narrative was largely driven by geopolitical rivalries and domestic political sentiments in US and India. Misinterpreting the Hambantota Port lease as a case study provided much-needed validation for the DTD narrative.