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Laos default will now give momentum to Chinese debt trap policy
Laos-China
Image: Wallpaper Cave

Laos default will now give momentum to Chinese debt trap policy

| @indiablooms | 18 Jul 2022, 11:21 pm

Beijing: Laos, the only landlocked country in Southeast Asia, is currently facing an intense economic crisis and there seems to be no respite from it without some form of a Chinese bailout or debt forgiveness, media reports said.

Various warning signs are blinking red in the small Southeast Asian country.

The national currency, the kip, has lost around a third of its value against the US dollar compared to this time last year.

Inflation hit 23 percent in June, its highest level in decades. Meanwhile, much of the landlocked country faces fuel shortages, reports Asia Times.

The communist-run government has huffed and bluffed but finally undertook a cabinet reshuffle in late June, bringing in a new commerce minister and central bank governor.

Some emergency measures have stemmed certain economic problems from worsening.

“The chances that Laos will default on its debt obligations are extremely high,” Carl Thayer, an emeritus professor at the University of New South Wales in Australia told Asia Times.

Indeed, the country’s foreign debts have swelled to over US$14 billion, or 88 percent of gross domestic product (GDP).

Around half that amount is owed to China, including the Lao state’s one-third stake in the $5.9 billion China-Laos railway, a megaproject that opened in December amid concerns about the line’s commercial viability.

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