Borrowing from the next generation

Timor-Leste's voters will choose their next President this weekend and a new Parliament in a few months. But obligations incurred by the current Government will have to be repaid several terms of office from today. This country is about to take out the first foreign loans in its history, with plans to borrow half a billion dollars during the next four years. Link to information about current borrowing plans and how we got here.

This map shows projects in the 2012 State Budget, as well as the road west from Liquica financed by a grant from the Asian Development Bank (ADB). No loan agreements have been signed yet, although the Japanese (JICA) one for the Dili-Baucau road (blue) and the ADB loans for the Dili-Liquica and Tibar-Gleno (red) roads are imminent. The World Bank loans for the roads south from Dili (green) won't be contracted until November 2012, and others are next year or later.

The graph shows La'o Hamutuk's projections of the annual cost of repaying the loans on the map. Figures for the JICA, ADB and World Bank loans come the lenders, but those from China and the not-yet-identified financer for the South Coast Highway are estimates by La'o Hamutuk (yellow cells in the table below).

The map and graph include the following loans:

Project	Financed by	Loan	Grace period (yrs)	Term (yrs)	Interest rate	Total repaid
Dili-Liquica-Gleno roads	ADB ADF concessional	$9.1m	8	32	1.0% / 1.5%	$12m
Dili-Liquica-Gleno roads	ADB OCR commercial	$30.9m	5	25	LIBOR + 0.19%	$46m
Dili-Ainaro, Same, Ermera roads	WB IDA concessional	$20m	10	25	2.5%	$28m
Dili-Ainaro, Same, Ermera roads	WB IBRD commercial	$20m	5	30	LIBOR + 0.46%	$32m
Dili-Baucau road	JICA concessional	$68.7m	10	30	0.7%	$77m
Dili drainage	China Ex-Im bank	$40m	10	25	3.0%	$60m
Manatuto-Natarbora road	ADB commercial (?)	$75m	5	25	LIBOR + 0.19%	$110m
Tasi Mane highway	unknown commercial	$220m	10	20	4.0%	$352m
Total		$484m				$717m

This is only the foot in the door. Some estimate that Timor-Leste may borrow six billion dollars to finance the Strategic Development Plan, and even more if we pay to build components of the Tasi Mane petroleum infrastructure project in addition to the Suai Supply Base.