Laos is a lower-middle income economy according to the World Bank, and a UN-designated Least Developed Country. Its 2023 GDP of $15.8 billion accounts for 0.4% of the regional GDP of Southeast Asia. With a population of 7.7 million, Laos’ GDP per capita is $2,067, the third-lowest in the region.
From 2015 to 2023, 11,522 aid and development projects were implemented in Laos by 75 development partners, totalling $16.5 billion in official development finance (ODF).
Key trends
ODF disbursements including grants, loans, and other forms of assistance to Laos have decreased over time. A 2018 peak in spending of over $2.5 billion has dropped by more than half to a post-Covid (2021–23) average of $1.2 billion annually.
ODF remains very high as a proportion of GDP in Laos, at 6% in 2023. Laos’ 2023 ODF to GDP ratio is the third-highest in the region. However, progress has been made since 2015 when ODF was equivalent to more than 14% of Laos’ output. Of total ODF to Laos, 50% is delivered through non-concessional loans, 30% through grants, and 20% through concessional loans.
Looking ahead, new commitments to Laos have been highly variable but rebounded slightly in 2023. The 2023 level is a quarter of the peak level of commitments in 2016.
- Spent
- Committed
Development partners
China is Laos’ primary development partner, accounting for 58% of its total ODF received since 2015, though its contribution has waned. The Asian Development Bank (ADB) and Japan have provided relatively steady levels of support, while the World Bank’s ODF to Laos has increased.
By year, 2023 recorded China’s lowest spend in Laos since prior to 2015 at $223 million, a dramatic drop to just 16% of the pre-Covid (2015–19) average of $1.4 billion. China’s ODF is spent overwhelmingly in the energy sector on hydropower dams, and delivered largely through non-concessional loans. The collapse in China’s disbursements in Laos likely reflects acute concerns around debt sustainability.
The ADB’s investments in Laos have been predominantly directed to the energy and agriculture, forestry, and fishing sectors. Concessional loans made up 48% of the total, with 37% delivered through grants, though 2023 saw the first disbursement of non-concessional finance since before the pandemic.
Japan’s support to Laos is highly concessional, with 74% in the form of grants and the rest as concessional loans for infrastructure projects. Although in earlier years the infrastructure sectors of transport and storage, energy, and water and sanitation attracted the most Japanese ODF, Japan’s approach has evolved to prioritise human development sectors such as government and civil society, health, and education.
The World Bank has ramped up its engagement in Laos, particularly with high growth in concessional loans in the banking and financial services, government and civil society, and education sectors. Reform to financial services, road construction, and disaster preparedness were the focus for the World Bank in Laos in 2023. The Bank’s approach to financing mechanisms has changed since 2015, from a much higher volume of grants in earlier years to exclusively non-concessional loans in 2022 and 2023.
Laos receives less than the regional average for every sector as a proportion of ODF save for education and energy, where the spend in Laos is triple the regional average (52%).
The energy sector is dominated by several multi-billion-dollar energy generation projects, especially hydropower dams on the Mekong. At times, from 2016 to 2018, the proportion of Laos’ total annual ODF directed to the energy sector has exceeded 60%. But this dominance is receding. In 2023, the ratio was as low as 25% (still far above the regional average of 17%).
Other sectors including education, government and civil society, and health have experienced substantial growth in recent years. Of particular note is Laos’ divergence from the regional average in the transport and storage sector, which attracts the most ODF across the region but accounts for only 8% of Laos’ total ODF.
- Laos
- Regional average
Policy goals
The Southeast Asia Aid Map tracks ODF with integrated policy goals across three policy domains or cross-cutting themes (as distinct from sectors): climate action, gender equality, and disability inclusion.
Over 2015–23, Laos received more than the regional average for ODF integrating climate action (60%). This figure can be partly attributed to the classification of hydropower dams as renewable energy generation projects and therefore as integrating climate action, notwithstanding criticism of the dams for environmental damage.
However, Laos received less than the regional average for ODF targeting disability inclusion (3%) and gender equality (14%).
Provision of intra-regional ODF
Laos provides an average of $93,000 annually in intra-regional ODF, the second-lowest amount in the region. It contributes annually to regional efforts in the humanitarian aid sector, and offered support bilaterally to Indonesia in 2021. However, Laos is the largest recipient of intra-regional ODF, having received more than two-thirds of all intra-regional ODF since 2015. Its primary supporter is Thailand, which provides concessional financing mostly for small transport and storage projects, including roads and bridges.