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Agence France-Presse

Suffocating under a mountain of debt to China, communist Laos is struggling to tame rampant inflation, with food prices rising so sharply that a growing number of households are resorting to foraging.
At a market in Vientiane, traders said they have never known business to be so slow, as families have seen the value of their money collapse.
While the Covid-19 pandemic and Russia’s invasion of Ukraine sent prices around the world spiralling, Laos has found itself incapable of putting the brakes on inflation.
Prices rocketed 23 per cent in 2022 and 31 per cent last year, while they are on course for 25 per cent this year, according to the Asian Development Bank (ADB).
Families in particular have been hit hard as the cost of basic staples such as rice, sugar, oil and chicken doubled last year.

A growing number of households are so desperate for food that they are now having to forage to supplement their diets, according to a World Bank household survey earlier this year.
At Vientiane’s morning market, a gold trader said that where customers used to come to buy necklaces, rings and earrings for special occasions, now all anyone wants is to sell their valuables to raise cash.
“I sometimes sit all day and nobody buys my gold,” the 45-year-old said last month, speaking on condition of anonymity because talking to foreign media in authoritarian, one-party Laos is risky.
“My shop used to be busy but now nobody buys gold – they all come to sell it to get money.”
After 15 years running his shop, the trader said he fears for the future of his business.

Despite three decades of consistent economic growth, Laos remains one of the poorest countries in Asia, with limited transport infrastructure and a low-skilled workforce mostly employed in agriculture.
Life expectancy is just 69 years and the ADB says that nearly one in three children under five is stunted because of malnutrition – one of the highest rates globally.
In recent years, the government has borrowed billions of dollars from neighbour China to fund a US$6 billion high-speed railway and a series of major hydropower dams – aiming to become the “battery” of Southeast Asia.
The World Bank warned in a report last week that public debt – over US$13 billion, or 108 per cent of GDP – was “unsustainable”.

Servicing the debt is fuelling inflation by driving down the value of the kip, which lost half its value against the US dollar in 2022, and nearly one-fifth in the first nine months of 2024.
“Given Laos’ heavy reliance on imports, the kip’s depreciation has driven up domestic consumer prices and inflation, squeezing domestic demand and slowing economic recovery,” said Poh Lynn Ng, an economist with the Asean+3 Macroeconomic Research Office.
Interest payments totalling US$1.7 billion are due in 2024 and an average of US$1.3 billion for the next three years, further eroding Laos’ foreign exchange reserves.
The Laotian finance ministry did not respond to a request for comment.
The Bank of Lao PDR has raised interest rates and in August, the government launched a plan aiming to bring inflation below 20 per cent by December.

But Vivat Kittiphongkosol of the Joint Development Bank Laos said the government had been “too slow” to react as problems unfolded.
“To kill this economic problem, you cannot utilise a single transaction and expect it to solve everything. You need to do a lot of things,” he said.
The World Bank says the government has brought some stability to its finances, but mainly through debt deferrals and limiting spending on health, education and welfare.
Alex Kremer, the World Bank’s country manager for Laos, warned these austerity measures would have damaging long-term consequences.
“Continued underinvestment in human capital will damage the country’s long-term productivity and its future ability to compete in regional markets,” he said.
Instead, the World Bank has urged the government to boost revenue by cutting tax breaks – and also to try to restructure its debt.
Though small, Laos is too important to Beijing to be allowed to fail, JDB’s Vivat said, both politically and as a key leg in the Belt and Road Initiative route that aims to connect southwest China ultimately to Singapore.
A Chinese foreign ministry spokesman said Beijing was doing “all it can to help Laos ease its debt burden”.
But Laotians can expect more pain in the short term, with the ADB predicting inflation will stay above 20 per cent until the end of next year at least.


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Laos

An official checks passengers’ tickets in front of Vientiane Railway Station. Laos borrowed billions of dollars from neighbour China to fund a US$6 billion high-speed railway and a series of major hydropower dams. Photo: AFP

Street vendors wait for customers in Laos’ capital Vientiane. Photo: AFP

A woman buys fruit from a street stall in Vientiane. Laos remains one of Asia’s poorest countries. Photo: AFP

A 100,000 kip note. Servicing debt is driving down the value of Laos’ currency, fuelling inflation. Photo: Shutterstock

Vivat Kittiphongkosol, chairman of the economic advisory board of the Joint Development Bank Laos. Photo: AFP

As Trump returns, Asia prepares to pay the price for reprise of ‘America First’ policy

Donald Trump’s return to the White House signals that America’s experiment with isolation is in fact a long-term directional change. Photo: TNS

A ship at the container terminal in Port Klang near Kuala Lumpur, Malaysia. Trump has pledged to impose a 10 per cent tariff on imports from all countries. Photo: Shutterstock

India’s Prime Minister Narendra Modi with US President Donald Trump during a meeting at Hyderabad House in New Delhi in February 2020. Photo: AFP

Trump meets North Korean leader Kim Jong-un at the demilitarised zone separating the two Koreas, in Panmunjom, South Korea, on June 30, 2019. Photo: Reuters

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THAAD interceptors are seen as they arrive at Seongju, South Korea, in September 2017. Photo: Reuters

UK Defence Secretary John Healey, US Secretary of Defence Lloyd Austin, and Australian Defence Minister Richard Marles meet in London in September. Photo: Pool via Reuters

Philippine Navy Fast Attack Interdiction Craft Lolinato To-Ong passes by a Chinese Navy ship during a Philippine military multi-service joint exercise on Wednesday at Loaita island in the disputed South China Sea. Photo: AP

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In Laos, Southeast Asia’s highest inflation forces some to flee, others to get creative

A vendor carries fresh produce for sale in Luang Prabang, Laos. Laotians grow their own food to reduce the need for expensive imported basic necessities. Photo: AFP

A tourist at Panyanivej Organic Farm in Laos. As well as selling rice and vegetables, the farm now offers guided tours and courses on cookery and ceramic-making. Photo: Somchit Phankham/Handout

 Laotians work on Panyanivej Organic Farm. The farm has experienced a labour shortage in recent years Photo: Somchit Phankham/Handout

Black market currency dealers count kip banknotes at the entrance of a market in Vientiane in 1998. The government opened Laos to the world in the 1990s. Photo: AFP

Children help their mother push a cart loaded with vegetables to sell at a market in Vientiane. Photo: AFP

Malaysia’s diesel subsidy removal fuels inflation fears

People dine in a restaurant in Kuala Lumpur. Malaysian businesses are warning they may have to pass on rising costs to customers. Photo: Shutterstock

A construction site in Kuala Lumpur. Heavy machinery used for construction does not qualify for subsidised diesel under Malaysia’s new subsidy regime. Photo: Reuters

Najib Razak (centre) is escorted by prison officers during an appeal hearing at the Kuala Lumpur High Court on June 5. Photo: AFP

The latest diesel price is seen at petrol station in Kuala Lumpur on June 10. Photo: EPA-EFE

Laos’ fast train to China brings connection at a cost, with big promises but uneven progress

An aerial view of the China-Laos railway in Luang Prabang province, with deforested hills nearby. Photo: Aidan Jones

Passengers in Laos wait to board the high-speed train at Vientiane station. Photo: Aidan Jones

Laotian workers in the Boten special economic zone near the border with China. Photo: Aidan Jones

Construction at the border town of Boten, a special economic zone and the final stop on the China-Laos railway. Photo: Aidan Jones

Aerial view of a village in Laos’ Oudomxay province, whose residents had to move to make way for a hydropower scheme. Photo: Aidan Jones

Road-building in the remote hills of Laos’ Oudomxay province to allow trucks to reach a new Chinese mining concession. Photo: Aidan Jones

Thai tourists pose for selfies on arrival at Luang Prabang station in Laos. Photo: Aidan Jones

A hydropower dam over the Nam Beng river in Oudomxay province is a relatively small Chinese-led investment in Laos. Photo: Aidan Jones

Farmers harvest rice in Oudomxay province, Laos, on land leased by Chinese investors. Photo: Aidan Jones

News

Asia

Southeast Asia

For three years, prices have risen by more than 20 per cent – forcing a growing number in the Southeast Asian nation to forage for food


For three years, prices have risen by more than 20 per cent – forcing a growing number in the Southeast Asian nation to forage for food.


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