KEY RATING DRIVERS
The Negative Outlook reflects the economic and financial-market effects of the coronavirus shock, which have compounded Laos’ external financing risks associated with its forthcoming external debt maturities and low foreign-exchange buffers.
Public finances will also deteriorate from a combination of slower nominal GDP growth, fiscal relief measures and restrictions to contain the pandemic. GDP growth in 2020 will be hit severely by the coronavirus shock, although Laos has reported relatively few cases of the virus at just 19 as of mid-May, and a one-month lockdown expired on 3 May 2020.
Laos faces a challenging external debt repayment profile. About USD900 million in public external debt-service payments (interest and amortisation) are due over the remainder of 2020, including baht-denominated maturities in the Thai bond market of roughly USD150 million in June and USD100 million in October, against foreign-exchange reserves of about USD1 billion at end-March 2020.
The capacity to roll over or refinance upcoming maturities over the next few months will be an important indicator of the authorities’ ability to meet their financing obligations during the remainder of the year. Roughly USD1 billion in external debt servicing will be due annually from 2021-2023.
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