Laos , Apr 13, 2025
Laos is facing its most severe economic crisis in decades, as ballooning public debt—now estimated at over 100% of GDP—forces the country to seek emergency financial assistance from regional partners and multilateral lenders. The crisis has sparked fresh debate about fiscal transparency and the long-term consequences of Chinese lending under the Belt and Road Initiative.
This week, Thailand, China, and the Asian Development Bank (ADB) announced coordinated aid measures to stabilize the Laotian economy. These include emergency cash infusions, currency swap agreements, and technical assistance for public debt restructuring.
“Laos is at a tipping point,” said ADB economist Sutida Vongchai. “Without immediate intervention, the risk of default is real—and the ripple effects could harm regional stability.”
Much of Laos’ debt is owed to Chinese state-owned enterprises that funded major infrastructure projects, including the $6 billion Laos-China railway. While the railway has improved connectivity, it has yet to generate enough revenue to service the loans, leading to questions about the economic viability of such megaprojects.
Citizens are already feeling the pain. Inflation has surged above 20%, the kip has sharply depreciated, and basic goods are becoming unaffordable. Small businesses are closing, and fuel shortages are increasingly common in rural provinces.
The Lao government has pledged greater transparency moving forward. Finance Minister Bounleua Sinxayvoravong said the country will conduct a full audit of foreign debt and seek to renegotiate high-interest obligations. “This crisis is a wake-up call for responsible borrowing and spending,” he noted.
China has responded cautiously. While reaffirming its “long-standing friendship” with Laos, Beijing stopped short of offering debt forgiveness, opting instead for debt rollover deals that delay repayment deadlines.
For ASEAN, Laos’ crisis poses a broader dilemma: how to support economic resilience among smaller member states while avoiding overdependence on any one foreign power. The emergency aid response, analysts say, is a test of ASEAN solidarity and multilateral coordination in times of economic distress.
