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Laos’s China problem is ominously similar to crisis-ridden Sri Lanka's

Laos faces bankruptcy, but like another crisis-ridden Asian state, Sri Lanka, its future is not in its own hands. That role is played by China, whose aggressive lending has helped to take one country to the brink of default and the other well past it.

A freight train inaugurates the China-Laos railway at the end of 2021.

All is not well in Laos. The sovereign body is ailing, teetering on the brink of bankruptcy. The country’s problems are many, ranging from rampant inflation to external debt overload, much of which is owed to its neighbour and creditor-in-chief, China.

“The macroeconomic situation is very challenging,” says Pedro Martins, senior country economist for Laos at the World Bank. "Longstanding structural vulnerabilities have been exacerbated by the impacts of the pandemic, a deteriorating global macroeconomic environment, and the rapid depreciation of the Lao kip."

Authorities in the capital Vientiane understand the gravity of the situation and are actively seeking solutions.

On June 29, the governor of the Bank of Laos, Bounleua Sinxayvoravong, strode into the National Assembly and told those assembled that in the five years to the end of 2021, exports should have netted Laos $26.44 billion – yet the sum total of foreign currency flowing through the banking system was just $5.76 billion.

That shortfall has only worsened.

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