Laos Struggles with Debt: Owes China Billions

Laos, a Southeast Asian country located between Thailand and Vietnam, is facing a significant debt crisis. The country’s debt has nearly doubled, reaching USD 950 million in 2023, up from USD 507 million in 2022. Most of this debt is owed to China, according to The Laotian Times.

A report from the Ministry of External Affairs in Laos stated that the country deferred a debt of USD 670 million in 2023, excluding the USD 1.22 billion already deferred since 2020. Laos currently has a total of USD 13.8 billion in public debt, which is 108% of its GDP. Notably, around USD 10.5 billion of this debt is owed to China.

This heavy debt situation emerged as China increased its lending to smaller countries that lack the capability to repay, allowing China to capture assets for its expansionist motives. The depreciation of the Laotian currency, the Kip, by 31% against the US dollar last year has worsened the situation, making repayment difficult as 59% of the total debt is in US dollars.

Major projects like the Nam Ou hydroelectric plant, built by the Power Construction Corp. of China for USD 2.8 billion, and the USD 6 billion China-Laos railway project, which opened in December 2021, highlight China’s influence in the region. The railway provides a direct route from Kunming, China, to the Gulf of Thailand.