Sri Lanka's Economy
Hambantota and the Debt-Trap Debate
How Sri Lanka built a Chinese-financed port at Hambantota, leased it to a Chinese firm for 99 years in 2017, and why researchers dispute the "debt-trap diplomacy" story.
Hambantota is a port in southern Sri Lanka.
The project
- Built with Chinese loans from 2008, in the home district of then-President Mahinda Rajapaksa.
- It attracted little shipping traffic and lost money.
The lease
In 2017, Sri Lanka leased the port to China Merchants Port Holdings for 99 years for about 1.1 billion dollars, using the money to ease its debt situation.
Debt-trap diplomacy?
- Some commentators said China deliberately trapped Sri Lanka in debt to gain a strategic port.
- Researchers like Deborah Brautigam argued the port was Sri Lanka’s initiative and the lease was driven by Sri Lanka’s broader debt problems, mostly owed to other lenders.
Other white elephants
Mattala airport nearby, also Chinese-financed, saw very few flights.
Chinese lending
China became one of Sri Lanka’s largest bilateral lenders.
Lesson
Infrastructure must have demand; political prestige projects can become costly burdens.
Mattala airport, built to serve Hambantota, saw so few flights that it was once called the world's emptiest international airport.
China was a big lender, but commercial bonds and fiscal policy mattered more.
- Hambantota port was built with Chinese loans.
- It was leased to a Chinese firm for 99 years in 2017.
- The debt-trap narrative is disputed by researchers.
- Prestige projects without demand can become burdens.
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