Laos is drowning in debt. China, its biggest creditor by far, says it’s ‘doing its best’ to help

The tiny Southeast Asian nation’s massive debt burden amounts to 108 per cent of its gross domestic product

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A train travels across the Mekong river on a bridge of the China-Laos Railway, which cost the landlocked country about US$6 billion. Photo: Xinhua

Published: 3:03pm, 3 Jul 2024

China said it is helping neighbouring Laos to ease its massive debt burden after the Southeast Asian nation revealed that external repayments have nearly doubled and it wants further deferrals to prevent a default.

Beijing has carried out “mutually beneficial cooperation” with developing countries including Laos that involves strong support for economic and social development, a spokesman at China’s Ministry of Foreign Affairs said on Tuesday in a written reply to questions.

“At the same time, it has been doing its best to help relevant countries alleviate their debt burden,” he added.

China is by far Laos’ biggest creditor, accounting for about half of the US$10.5 billion in external government debt. The tiny nation had US$13.8 billion in total public and publicly-guaranteed debt at the end of last year, amounting to 108 per cent of its gross domestic product.

Communist-run Laos has come to the fore after it opened a high-speed rail line with China that cost the landlocked country about US$6 billion. While the development is seen by many as the start of a ramp up in infrastructure that directly connects the world’s second largest economy with Southeast Asia, it has raised concerns of a build-up in debt for smaller nations.

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Laos’ external debt payments last year reached US$950 million, making the country defer US$670 million in principal and interest payments. The World Bank has said in the past that such moves have provided temporary relief in recent years.