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The Yumo railway, which will connect Laos to China, under construction in Yunnnan province, China. The Yumo railway, which will connect Laos to China, under construction in Yunnnan province, China, May 26, 2019 (TPG photo via AP Images).

Laos, Trying to Build Its Way to an Economic Boom, Could Be Sunk by Debt

Wednesday, Aug. 21, 2019

Is Laos on the edge of an economic boom, or a bust? Six of the 11 countries in Southeast Asia have an external debt higher than the developing world average of 26 percent of gross national income, according to a report last year by FT Confidential Research, an independent research service from the Financial Times. Laos was the worst offender, with an external debt of 93.1 percent of its GNI. Laos was also weakest when it came to its ability to repay loans. Its ratio of external debt to exports, an important indicator, was 327.9 percent. Foreign currency reserves are also in short supply. They were valued at $885 million in March. While slightly up from $873 million in late 2018, the reserves account for just over one month’s worth of imports. In early 2017, the International Monetary Fund increased Laos’ risk of “external debt distress” from moderate to high.

“If we don’t borrow,” Prime Minister Sisoulith Thongloun told the Nikkei Asian Review in May, “Laos, as a least developed country, won’t develop further.” He told the same newspaper last year that he was “not concerned much about the burden of debt.” ...

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