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Lao PM Gives Interview to Chinese Media, Says Debt Trap Not Real

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During his visit to Nanning Province, China, Laos’ Prime Minister Sonexay Siphandone sat down for an interview with CGTN, a state-run English news channel, to discuss Laos-China relations, along with Laos’ mounting foreign debt, on Sunday.

During the interview, PM Sonexay was asked to share future insights into the development of both countries, along with Laos’ external debt situation with China.

PM Sonexay said, “Laos and China have always maintained a very friendly cooperative relationship. In 2017, the two countries agreed to jointly build a community with strategic significance for the shared future of China and Laos.”

The Lao leader also highlighted cooperation between the two countries in the field of national security to combat transnational crime and electronic fraud.

PM Sonexay then clarified the situation of the debt Laos owes to China, urging the media to not misrepresent the situation, “While some countries and media claim that Laos has fallen into a debt trap with China, it’s important to note that Laos carries debts not only from China but also from other international financial institutions.”

According to CEIC Data, Laos’ external debt increased from USD 2.9 billion in 2011 to USD 10.2 billion in 2022, which was exacerbated by the USD 6 billion-worth Laos-China Railway project.

The Laos-China Railway now connects Vientiane, the capital of Laos, with Kunming in China’s Yunnan province, facilitating both passenger travel and cross-border trade.

Looking at Laos’ external debt, especially the debt incurred to build the railway, both the Lao President and Prime Minister share the same positive outlook on its economic impact. Both leaders believe the railway has significantly contributed to the country’s economy and will pave the way for a better future.

President Thongloun Sisoulith said in May during an interview at the Nikkei Future of Asia conference that, “It will contribute meaningfully to our efforts in transforming our country from landlocked to land-linked.”

Whereas Laos’ PM, Sonexay Siphandone, added, “These debts have made positive contributions to Laos’ economic and social development, which is why we have borrowed them.”

Nevertheless, President Thongloun informed Nikkei that the country does have external debt, especially with China, but the “amount is still manageable for Laos and not as huge as other countries are experiencing.”

Contradicting the opinions of Laos’ leaders, recent reports from the World Bank and the IMF indicate otherwise stating that Laos’ economy is at high risk of debt distress, with the economy taking a huge hit following Russia’s war against Ukraine.

In fact, the Lao Kip dropped to a record low of below LAK 20,000 against the US dollar last week, in the face of soaring inflation and depleting foreign currency reserves, putting more stress on the Lao economy as payment of external debts looms over the country.

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