Fitch recently announced that it plans on withdrawing its rating for Laos by the end of September.
No further clarification was offered by the American Credit Rating company which said on its website that this decision was made due to “commercial reasons”. About a month ago, Laos’s credit rating was downgraded to CCC- owing to ever-rising inflation, high external debt, falling currency reserves, and a strong US dollar which has been effectively pushing the nation to default on its repayment of loans.
Fitch further added that it, “reserves the right in its sole discretion to withdraw or maintain any rating at any time for any reason it deems sufficient. Fitch believes that investors benefit from increased rating coverage by Fitch and is providing approximately 30 days’ notice to the market of the rating withdrawal of Laos. Ratings are subject to analytical review and may change up to the time Fitch withdraws the ratings.”
The World Bank has estimated Laos’s current debt to be around $14.5 billion, and it owes a majority of this amount to China towards loans to fund various large-scale infrastructure projects including the China-Laos Railway. And the organization states that Laos should repay $1.3 billion of external debt every year until 2025, which almost equals the country’s federal exchange reserves and half of total domestic revenue.
The World Bank anticipates that Laos’ economy will grow by 3.8% this year but that will not be sufficient to generate the fiscal revenue needed for the government to clear its foreign debt.
