Laos economy troubled but not at breaking point

Significance

Laos’s critically low foreign exchange (forex) reserves, significant currency depreciation and high inflation are prompting many external observers to suggest that it could soon default on its sovereign debt. A sizeable proportion of its public debt is owed to key partner China.

Impacts

• The lack of transparency in Laos's public finances makes it all the likelier that alarmism about the economy will persist.
• Exporters who prefer to keep their forex earnings offshore will come under growing pressure to bring them home.
• Vientiane will double down on efforts to reduce its import bill.