BangkokPost-June 15
Laos, with dwindling cash reserves and surging inflation, is facing some of the same strains that pushed Sri Lanka to default and threatens Pakistan’s balance of payments. Fuel shortages across the Southeast Asian country of 7.5 million people is the latest sign of distress, the result of elevated oil prices and a plunging currency. Most worrying is a debt load that dwarfs its cash pile, a challenge for the secretive communist regime that’s had an ironclad grip on power since 1975.
“It is on the brink of default,” said Anushka Shah, vice president and senior credit officer at Moody’s Investors Service, which downgraded Laos’s credit rating on Tuesday one notch to Caa3, citing weak governance, a very high debt burden and insufficient foreign exchange reserves to cover maturing external debt.
According to the World Bank, as of December the country had US$1.3 billion of reserves on hand while external debt repayments total roughly that same amount every year until 2025, the equivalent of about half total domestic revenue. The one-two punch of higher US interest rates — which weakens local currencies against the dollar and makes imports more expensive — and surging oil prices, mainly due to Russia’s invasion of Ukraine, has brought a reckoning to developing countries with high debt loads, weak revenue and insufficient cash reserves. The ruling Lao People’s Revolutionary Party, which runs the highly restrictive one-party state, is expected to weather the current challenge. Read more at: https://www.bangkokpost.com/business/2326818/looming-debt-crunch-positions-laos-as-next-possible-asia-default
