The poor, small Southeast Asian country of Laos is set to cede majority control of its electric grid to a Chinese company, as it struggles to stave off a potential debt default, people with direct knowledge of the agreement said, Reuters reported. The deal comes at a time when critics accuse Beijing of “debt trap diplomacy” to gain strategic advantage in countries struggling to repay loans taken out under President Xi Jinping’s global “Belt and Road” infrastructure initiative.
Laos faces a growing risk of debt distress and sovereign default, according to credit rating agencies and economic advisers, as coronavirus and a debt-laden power sector take their toll on one of Asia’s poorest countries, the Financial Times reported. The country’s foreign exchange reserves have fallen below $1bn, less than Laos’ annual debt payments, and ministry of finance officials have asked China, the country’s biggest creditor, for advice on a possible restructuring, the Financial Times has learnt. Moody’s Investors Service last month downgraded Laos’ issuer rating a notch to C