The communist apparatchiks who run Laos must appease China if they are to stop their national debt crisis from worsening and avoid an outright default. The IMF’s latest report on Laos, released last month, was particularly damning about the country’s future. Real GDP growth likely peaked this year, at around 4.1 percent, and will slide from 3.5 percent next year down to 2.5 percent by 2029.
In other words, Laos isn’t going to be able to grow itself out of debt anytime soon.Moreover, debt servicing costs, spending that is not actually paying off the principal on its monumental debt, will rise from around $1.1 billion this year to $1.5 billion next year and peak at $1.8 billion in 2026, the equivalent of a fifth of exports. Laos cannot even start to comprehend paying off its debt, which because of the country’s inflation crisis fluctuates as a percentage of GDP ratio. It was 131 percent of GDP in 2022, down to 108 percent this year but potentially up to 118 percent in 2025.
