(KPL) Laos’s economy is grappling with macroeconomic imbalances and an external debt burden, according to Professor Toshiro Nishizawa of the Graduate School of Public Policy at the University of Tokyo. In a recent interview with the Lao News Agency, Professor Nishizawa highlighted key areas of concern and proposed strategies for sustainable economic growth.

The interview took place during a visit to Japan in preparation for the 70th anniversary of diplomatic relations between Laos and Japan, set for 2025.

Professor Nishizawa emphasized that Laos’s heavy dependence on resource-based industries continues to hinder economic diversification, leaving the country vulnerable to external shocks. Despite government efforts to promote manufacturing, the economy remains trapped in a cycle of challenges that necessitate decisive policy interventions to shift toward a sustainable growth trajectory.

He proposed aligning fiscal policies with long-term objectives to maximize the economic and social benefits of existing infrastructure. Strengthened cross-border connectivity, he noted, could boost demand for locally produced goods and services, increase foreign exchange earnings, and improve production capacity, ultimately contributing to macroeconomic stability.

Professor Nishizawa outlined a three-pronged approach to address Laos’s economic challenges, including  (1st ) Bilateral Debt Negotiations with China: Laos should negotiate a bilateral debt agreement with China, focusing on a significant reduction in the net present value of public and publicly guaranteed (PPG) debt. Such a deal would free up fiscal resources for development investments outlined in the 9th National Socio-Economic Development Plan (NSEDP), (2nd) Time-Bound Fiscal Commitments: the government should commit to revenue mobilization and expenditure rationalization over the medium term. Policies must balance financial, environmental, and social sustainability to achieve macroeconomic stability and sustainable development and 3rd Maximizing Connectivity Gains: Leveraging infrastructure such as the Laos-China railway, particularly in the tourism sector, could generate significant revenue. Enhanced tax and fee collections from direct and indirect beneficiaries of connectivity services would help fund development initiatives.

Professor Nishizawa stressed the need for a comprehensive public debt management strategy in line with the Public Debt Management Law (2018). Immediate actions should address currency and maturity risks in public sector liabilities. Key measures include securing a bilateral debt deal with China, rolling over foreign currency-denominated debt at favorable costs, particularly bonds issued in Thailand and restructuring or phasing out poorly performing state-owned enterprises (SOEs) while strengthening viable ones.

Additionally, the development of a government bond market is crucial for mobilizing domestic savings to finance productive investments sustainably. A phased approach to developing both primary and secondary markets would diversify the domestic investor base over time.

Conclusion

As Laos navigates economic uncertainty, Professor Nishizawa’s insights underscore the importance of strategic reforms to address its debt burden and foster long-term growth. Collaborative efforts, both domestically and internationally, will be key to achieving macroeconomic stability and sustainable development.

Professor Nishizawa has been a full-time faculty member at the University of Tokyo’s Graduate School of Public Policy since 2013. His distinguished career includes roles at the Japan Bank for International Cooperation (JBIC), the International Monetary Fund (IMF), and the World Bank.

He served as the lead researcher for the Fiscal Stabilization in Lao PDR program (2018–2020) and was recognized with Japan’s Foreign Minister’s Commendation in 2022 for his contributions to human resource development in Laos.

With extensive expertise in Asian economies, sovereign debt, and Public-Private Partnerships (PPPs), Professor Nishizawa holds multiple academic credentials, including a BA in economics from the University of Tokyo and an MSc in economics from the University of Wisconsin-Madison.

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