Laos may be the next country in Asia to default on its debt. The Southeast Asian nation's debt to China has grown over the past decade, and a debt crisis is brewing in Laos as foreign currency is running out. The economic situation in Laos has been deteriorating in the past few weeks. The slump in the local currency , the kip , has caused import costs to rise, and Laos faces its worst price hike since 2004, with inflation hitting 12.8 percent in May and an average of 9 percent in the first five months of the year.
The devaluation of the currency has banner design seriously affected the lives of the local people, and the Lao government cannot import enough fuel and other daily necessities. According to local media reports in May, long queues of vehicles are common at gas stations, and more than half of Laos’ natural gas demand cannot be met. While almost every country in the world has been hit by rising commodity prices of late, Laos is facing a particularly dire situation, as it has accumulated a large amount of debt and does not have enough foreign exchange reserves to cover its near-term import needs.
Greg Raymond, an expert on Southeast Asia at the Australian National University, told VOA: "The recent reasons are higher oil prices due to the war in Ukraine and the devaluation of the Lao currency due to higher US interest rates. During the Covid-19 period, tourism has The drop in revenue is also damaging. But deeper reasons include the country’s decision to borrow heavily to finance large infrastructure projects.” In the middle of this month, Moody's , an international credit rating agency, downgraded Laos' credit rating by one notch to Caa3, citing a very high debt burden and insufficient foreign exchange reserves to pay due foreign debts. The agency warned that Laos was on the verge of defaulting on its debt.