Debt distress and inflation near 40 percent

Laos's currency, the kip, has been under pressure since the pandemic, when public debt, much of it owed to Chinese lenders for infrastructure including the Laos-China railway and hydropower projects, rose above 100 percent of GDP, and foreign-exchange reserves fell to levels covering only about a month or two of imports. The Bank of the Lao PDR faced a shortage of foreign currency, and the kip fell sharply against the dollar, losing more than half its value between 2021 and 2023. Annual inflation rose to close to 40 percent at the end of 2022 and remained above 30 percent through much of 2023, with food and fuel prices rising fastest. The authorities have sought to restructure and reschedule debt and to tighten policy, and the surge in prices and the currency's fall explain the break in Laos' inflation and exchange-rate charts after 2021.