Laos now in China’s grip as BRI accounts for nearly half of its GDP

Laos is within grab for China, which accounts for over half of the tiny Asian country’s accumulated external debt of $10.5 billion and no means of repaying the debt. 

Laos is sitting on a debt pile of $13.8 billion – both public and publicly guaranteed – which is about 108 per cent of its GDP. 

China, by far the largest creditor of Laos, continues to provide financial support to that country even the impoverished country was forced to defer $670 million in principal and interest payments of the $950 million in external debt obligations.

China’s financial backing has come as a brief respite for Laos, according to earlier statements issued by the World Bank.

China said that it is assisting its neighbor in reducing its enormous debt load, after Laos sought more time to repay its foreign obligations as its foreign debt has almost doubled.

Most of Laos’s sovereign debt can be attributed to infrastructure funding made under China’s Belt and Road Initiative (BRI). As foreign debt mounted, Laos was forced to draw down its foreign reserves to service the mounting debt.

The debt crisis has also brought a currency crisis with rising food and fuel costs continuing to bring down the value of the Laotian currency kip to record lows against the US dollar.

The government’s measures to bring back stability have found no results.

President Xi Jinping’s government continued to provide massive loans to infrastructure projects like roadways, railways and hydroelectric projects under China’s BRI.

Communist-run Laos, one of Beijing’s closest allies in Asia, stands of being a part of that country, if its debt pile continues to mount.

Beijing, however, claims that it is engaged in “mutually beneficial cooperation” with developing nations, such as Laos.