The queues of cars from Laos waiting to fill their tanks at petrol stations across the border in Thailand have sparked fears the landlocked Asian country’s debt is spiralling out of control and could go the way of Sri Lanka.
Laos has been struggling with heavy debt mainly due to mega infrastructure projects, such as the Laos-China railway. Around half of the country’s projected debt stock of over 100 percent of GDP is owed to China, but despite claims to the contrary, Laos is not debt-trapped by Beijing. The answer to why lies in the mutual dilemma both countries face.
Indebted infrastructure projects can affect both the debtor and the creditor — a ‘debt trap’ for a debtor often suggests a ‘debt trap’ for a creditor with non-performing assets.
