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Laos is drowning in debt. China, by far its largest creditor, says it’s “doing everything it can” to assist

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China has announced that it helps its neighbors Laos to ease its massive debt burden after the Southeast Asian country revealed external repayments had almost doubled and it wants further deferrals to stop default.

Beijing has implemented “mutually helpful cooperation” with developing countries including Laos that involves resolutely supporting economic and social development, a Chinese Foreign Ministry spokesman said Tuesday in a written response to questions.

“At the same time, we did everything we could to help the countries concerned reduce their debt burden,” he added.

China is by far Laos’s largest creditor, accounting for about half of its $10.5 billion in external government debt. The tiny country had $13.8 billion in total public and state-guaranteed debt at the top of last 12 months, 108 percent of its gross domestic product.

Communist Laos got here to the fore after opened a high-speed rail line with China costing the landlocked country an estimated $6 billion. While the event is seen by many as the start of an infrastructure expansion that directly connects the world’s second-largest economy to Southeast Asia, it has raised concerns about mounting debt for smaller nations.
Laos’s external debt payments last 12 months reached US$950 million, leading to deferred principal and interest payments of US$670 million. world Bank has said before that such actions have brought temporary relief in recent times.
The country’s debt problems appeared when the US president Joe Biden‘s administration is attempting to offer developing countries an alternative choice to China’s efforts to expand its economic influence. Washington has often portrayed Beijing’s efforts as “debt-trap diplomacy” because countries like Sri Lanka AND Pakistan struggle with repayments.
Sri Lanka has declared default for the primary time in its history back in 2022 after foreign exchange reserves declined. Last monthThe South Asian country announced that it had reached final restructuring agreements value $10 billion, including with the Official Creditors Committee of bilateral lenders and China’s Exim Bank.

A Chinese Foreign Ministry spokesman dismissed accusations of “debt trap diplomacy,” describing them as US rhetoric aimed toward disrupting Beijing’s cooperation with developing countries.

“You can’t fool most developing countries,” he said in a written response.

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