Moody's downgraded its issuer rating on Laos to Caa2 from B3 and changed the outlook to negative from stable, citing heightened government liquidity risks.

The ratings action concludes the review for downgrade started June 19.

Moody's said the downgrade reflects its assessment that Laos is going through severe liquidity stress, which is aggravated by poor governance, and points to a probability of default in the near future. The negative outlook, meanwhile, reflects downside risks beyond what would be consistent with a Caa2 rating, according to Moody's.

Moody's further said it would consider raising the country's outlook back to stable if it reduces its financing risks by securing various financing options to meet upcoming repayments.