The trade deficit increased from US$92.2 million in 1982 to US$114.9 million in 1991, reaching a decade high of US$151.9 million in 1987, the first year of the drought (see table 11, Appendix). Before 1987 the deficit had increased by an average annual rate of 10.9 percent, but after the introduction of the New Economic Mechanism and subsequent loosening of many restrictions on trade, it actually began to decrease at an annual average of 7 percent, although in 1991 it increased slightly, by 3.2 percent. The deficit was largely financed through external assistance, including direct grants and highly concessional loans, and constituted approximately 16 percent of GDP in 1989-90. As the deficit decreased in response to increasing export volumes, the country's trade position also improved in terms of import financing. Between 1982 and 1987, exports financed less than onethird of imports, but beginning in 1990, import financing improved considerably, with exports financing over 40 percent of imports. This put Laos in a more secure position in view of sharply decreased foreign aid from the nonconvertible currency area.

Data as of July 1994