Laos Seeks Debt Extension Amidst Rising Financial Crisis

Laos, wedged between Thailand and Vietnam, seeks an extension for its burgeoning debt, which almost doubled to USD 950 million in 2023. Most of the debt is owed to China. Laos's currency depreciation and China's expansionist ambitions further strain the economy.

Laos, a Southeast Asian nation located between Thailand and Vietnam, is requesting more time to pay off its escalating debts. Recent reports reveal that the country's debt has surged to USD 950 million in 2023, nearly double the USD 507 million figure from 2022, with the majority owed to China, according to The Laotian Times.

The Laotian Times, citing a report from the Ministry of External Affairs in June, noted that Laos had deferred USD 670 million in debt this year, excluding the USD 1.22 billion already deferred since 2020. The country now has a total public debt of USD 13.8 billion, amounting to 108% of its GDP, with USD 10.5 billion owed to China.

This financial strain comes as China increases its loans to smaller, less financially stable nations. The depreciation of Laos's currency, the Kip, exacerbates the situation, weakening the country's economy and making repayment more difficult. The Kip fell 31% against the US dollar last year, and 59% of Laos's debt is denominated in US dollars.

The Nam Ou hydroelectric plant, built by China's Power Construction Corp. for USD 2.8 billion, started full operations in 2021. Additionally, the USD 6 billion China-Laos railway, opened in December 2021, symbolizes China's regional expansion ambitions, providing a direct route from Kunming to the Gulf of Thailand.

(With inputs from agencies.)