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Analysts: Rising Debt Burden Could Make Laos More Reliant on China

VOA News

   Laos is not likely to make all its debt payments this year, much of
   them owed to China, which has become the world's biggest lender, more
   so than the World Bank or any other global institution, according to
   analysts.

   When Vientiane's bills come due, how will renegotiations affect
   Beijing's growing influence in its fellow communist nation? The
   question is also part of a broader one being asked about Beijing's
   influence around Southeast Asia.

   Laos was already at high risk of what analysts called "debt distress"
   before the coronavirus pandemic, but COVID-19 has only raised the risks
   of its foreign borrowing.

   [1]Fitch Ratings downgraded its official outlook on the Lao economy to
   "negative" from "stable" last month, based largely on whether Laos can
   pay back foreign loans in the wake of the crisis.'¯Currently, Laos has
   19 coronavirus confirmed cases, according to Johns Hopkins University.

   The risk can be seen in the data. The debt that Laos owes China amounts
   to about 45% of the smaller nation's gross domestic product, which is
   the highest percentage among nations included in a 2019 analysis by the
   [2]Lowy Institute, an Australian research group.

   "Laos has accumulated significant external debt over the past decade in
   relation to major new hydroelectric projects, as well as Belt and Road
   infrastructure projects," said Rajiv Biswas, Asia Pacific chief
   economist at London-based analytics company IHS Markit. In an interview
   with VOA, Biswas also said this has "increased the debt repayment
   burden over the medium term."

References

   1. https://www.fitchratings.com/
   2. https://www.lowyinstitute.org/

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