The involvement of International Financial Institutions such as World Bank, Asian development Bank, International Monetary fund etc. in the resource exploitation in the third world is a very clear fact. The funds of the IFIs directly help to convert local policies towards more and more resources exploitation, conversion of forests into commercial fields, construction of Roads to countryside, and construction of Dams to exploit resources in large scale. 

Shrimp culture is a well-known ecological disaster, which produce unsustainable shrimps to the markets in the developed countries such as Japan, European community and US. ADB is directly involved in this disaster in Sri Lanka by providing funds to manage such unsustainable farms through National Development Bank and through the ministry.

Another example is the Tropical Forestry Action Plan (TFAP) – which is the response of the UN agencies and the World Bank to the international problem of tropical deforestation. Yet it has taken over the community land and involved in so-called sustainable logging. The main emphasis of the TFAP was to increase State revenue from the forests. This was to be achieved, essentially, by substantially increasing the production of timber through logging as well as by increasing wood yield from plantations. But projects funded under TFAP in many of the countries are for road building, machinery and vehicles. 

While the External Debt is an acknowledged problem, Ecological debt is a relatively new idea, probably due to the fact that politically, more importance has been placed on financial issues than on the loss of natural heritage.

The Living standards of the industrialized Northern countries owes a great deal to the massive flow of natural resources and work (either as slave or labour) of the developing countries, as a result of which, formed a Third world- Southern or developing countries of Africa, Latin America and Asia. The recompense paid by Northern countries to Southern countries has never taken into account the social and environmental damage caused by this exploitation. In effect, the impoverished countries of the South have subsidized and are continuing to subsidize the rich countries of the North through the provision of raw material, commodities and labour. (Ecological debt FOE Melbourne)

Ecological debt refers to the cumulative responsibility of industrialized countries for the gradual destruction of the planet caused by their production & consumption patterns. Natural wealth extracted by the North at the expense of Southern people has contaminated their natural heritage and sources of sustenance. Ecological Debt also includes the cost of human energy of the people of the Southern Countries. 

In the Sri Lankan context the issues, which could consider under ecological debt, are:

1. Extractions and destructions at the colonial period. (Forest clearing for tea and coffee plantations, collection of elephant tusks and other valuable items)
2. Extractions and exploitations for the industrial revolution
3. Destruction during the green revolution.
4. Lack of ecological taxation for the products and natural resources extractions
5. Exploitations by the trans-national corporations etc.
6. Through the appropriation and use of ancestral intellectual knowledge.
7. Through the use of bio-diversity and using the seed banks and gene banks.
8. Planting export monocultures
9. Carbon Debt and Green house gas emissions
10. Toxic dumping and dumping of non-degradable products such as plastics
 
Although the country has obtained the independence, the destruction was continued and since 60s it was done through the policies and involvements of the IFI loans and grants. However, there are no clear evidence how IFIs meet the liability for these destructions.

Ecuador provides an interesting case study. The country covers about 80 percent of its debt payments with oil revenues, and justifies its increasing incursions into new frontiers and indigenous lands based on the need to keep international creditors happy. 

Financial crisis follow close on the tail of the oil industry because governments take loans, increasingly from private sources, to support the capital needed for oil development. This leads to a new debt trap that ensures, through a variety of conditions, that more oil will be produced, enforcing the spiral of negative focus on other sectors of potential development. Examples of this debt-increasing resource extraction exist around the globe.

In 1994, the Papua New Guinea government was unable to pay its bills until it borrowed from the World Bank, International Monetary Fund and Asian Development Bank. Amongst the stipulations of the loans were conditions to allow further access to the country's natural resources, and recommendations to sell the government-owned Mineral Resources Development Corporation. Similar loan conditions have been attached, implicitly or explicitly, in places as diverse as the Former Soviet Union and Mexico.

Case I Kirindi Oya Irrigation Project

Sri Lanka has one example, which we fight with the ADB to pay the damages done by the ADB while designing Kirindi Oya irrigation project, which is a failure of the Bank. The project was proposed to provide irrigation water for 30,000 families but ended up with providing water only for the original water users i.e. less than 7000 families. The project destroyed the whole area and this is the area, which affects by the annual droughts. With respect to a complaint made by us, the ADB prepared a report, which was not published so far. In recent drought ADB provided money but it was not the compensation for the damage.

Under the post project Evaluation office, ADB monitor the projects but there is no information whether they have paid the compensation in the failures. Even if the liability comes to the IFIs they cannot be sued because of the legal status of the IFIs.
 
The grants, which are coming from the developed countries, can be treated as the payment of the ecological debt. But that may not be reasonable since the ecological debt is very much higher than the grants coming from bilateral and multilateral sources. The IFI loans are still come with conditions, which destroy the natural resource. 

The Bhopal case is a case, which has to be studied in this situation.

Case II Bhopal-Legal action in the US courts 
Seven individuals and five organizations, [three survivors' and two solidarity organizations] filed a class action suit on November 15, 1999 in the Federal District Court of New York against Union Carbide Corporation and its former Chairman Warren Anderson. The suit charged the Corporation and the official with grave violations of international law and human rights arising from their 'reckless and depraved indifference to human life' in perpetrating the disaster. In the context of Union Carbide and Anderson absconding justice in Indian courts, the suit invoked the Alien Tort Claims Act, a US law that permits foreigners to bring claims against a US private company committing gross violations of human rights. The case is being represented by the New York-based law firm Goodkind, Labaton, Rudoff and Sucharow reputed for their success in cases of large public interest. 
On August 28, 2000 Judge Mr. John F. Keenan of the Federal Court of the Southern District of New York dismissed the suit mainly on the grounds that the Bhopal Act [Bhopal Gas Leak Disaster (Processing of Claims) Act, 1985] prevented individuals or organizations outside the Government of India from bringing an action against Union Carbide or its official. Quite clearly this interpretation of the Bhopal Act is incorrect as a matter of law based on the Indian Supreme Court's authoritative interpretation of the Act. Further it is contrary to international law as well as the public policy of the United States and India.

In view of the travesty of justice in the wrongful dismissal of the case an appeal was filed before the Second Circuit Court of Appeals. Survivors and solidarity organizations have sought the support of the Indian government in the US class action suit. They have demanded an Amicus curae brief from the Union of India that presents the facts relating to the Bhopal Act. 

Another case was filed in Indian Courts for damages. Indian government first filed this case in America on the grounds that Indian courts will not be able to decide the issue of compensation in the best possible manner hence the Indian tort law is in its infancy. Union Carbide Company argued that Indian legal system is well developed that it could try the case. Finally the case was migrated back to the Indian courts as the American court decided United State was an inconvenient forum. UCC wanted the case transferred to India because Indian courts are not accustomed to awarding massive damages as American courts. The case was eventually settled in the Indian supreme court which ordered Union Carbide to pay US$470 million as compensation but concerns arose over the lack of connection between the award and the extent of the suffering victims and critics urge that this case demonstrates the difficulties of third world governments in attempting to bring transnational companies to book.

Case III Tropical forestry Conservation act of USA

The Government of Sri Lanka has decided to look into the possibilities of coming into an agreement with the Government of the United States of America to swap our national debts to the Conservation of tropical forests remaining in the country. This had been made possible under the Tropical Forest Conservation Act of 1998 (105 US C 214 of 29.07.1998). This act is an amendment to the Foreign Assistance Act (22 US C2151) and is intended to facilitate the protection of tropical forests thorough debt reduction with developing countries with tropical forests.

 Sri Lanka has a high level of bio-diversity and the highest degree of endemism in South Asia. The key to our future development lies in the conservation and rational use of our bio-diversity. This is more important when one considers the fact that Sri Lanka does not have rich deposits of minerals or oil and large amounts of revenue is needed to develop the country. Therefore, on the surface, the TFCA looks like a promising thing that could help save our forests and reduce the national debts at the some time.

However, it is seen that the TFCA itself states that tropical forests are important for the people of USA to maintain as reservoirs of species important in the field of Pharmaceuticals, wild relatives of crops and as Carbon sinks. The search for pharmaceuticals is a multi million-dollar industry, carried out mainly by US firms. Most of the microbes that have been used to produce antibiotics and other pharmaceuticals have come form tropical countries. Under the Clean Development Mechanisms (CDM's) proposed under the Kyoto Protocol a country either has to reduce its carbon emission or buy carbon entitlements from other countries. One from of entitlement is forest that absorbs carbon dioxide. The entitlement requires the country to pay an annual fee to those countries that have forests in order to continue with the present emission standards. It is believed that third world countries could derive a substantial income every year for keeping their forests. Therefore, it is clear that TFCA is device-to-device pharmaceuticals and have entitlements cheaply.

However, if the TFCA consider the past damage done by the Developed nations this would have been a different case.

Southern countries have a need and right to develop their economies. As long as resource extraction is the major path to this development however, these societies will find themselves increasingly trapped in a downward economic cycle. The South has already paid its debt in the form of polluted waters, deforestation, and rights violations, all to keep oil cheap for consumption in the industrial world. This concept of the ecological debt that is owed by the North to the South is critical if we are ever to find our way out of this current dilemma. 

The Rio Declaration signed at the Earth Summit in 1992 called on governments to include environmental costs in their accounting saying that the polluter should in principal, bear the costs of pollution. The rich countries should bear this obligation considering their ecological debt for their very survival.