"Going under? Belt and Road megaprojects and sovereign debt in Laos" 6 January 2022

Can we consider economic and financial ruptures, in addition to (or as an outcome of) nature-society ruptures? [...] To recap, sovereign debt dynamics exacted a steep cost on the Lao economy in 2021. Laos’ sovereign rating with Moody’s sits at a “Caa2” with a negative outlook, with Fitch similarly at CCC, both firmly within the sub-prime / speculative category. Lao public debt reached $13.3 billion (72% of  GDP in 2020), while debt servicing costs were at an alarming 52% of public sector revenues in 2021. [...]

Commentators have focused on the $5.9 billion Lao-China Railway project in the Government of Laos’ (GoL) debt conundrum. However Laos’ contribution to this project may be relatively contained. [...]

Overall, the Lao Government has pushed forward with an ambitious but risky hydro-power and infrastructure development scheme. The domestic component of Laos’ “Battery of Asia” ambitions has been funded to an important degree by China’s policy banks and involves Chinese construction firms. Our paper tracks the fallout from this debt-fueled infrastructure expansion in Laos, which has led to a credit crunch, pressure on state budgets, and the forced sale of state assets including the strategic EdL-T. Financial ruptures have thus flowed on from an aggressive dam-building spree in Laos. [...]

In Laos and in the Mekong region, it has been riverside communities and peasant farmers who have shouldered much of the cost of resource-led development, experiencing widespread dislocation, resettlement and sharp environmental impacts. Rural people displaced by dams are now joined by the urbanites struggling with inflation in household staples during a sharp economic downturn. [...]