Timor-Leste and World Bank sign agreement for US$ 121 million loan to provide drinking water

Fri. 29 of July of 2022, 16:32h

The Minister of Finance, Rui Gomes, on behalf of the Government of Timor-Leste, and the World Bank representative in Timor-Leste, Bernard Harborne, signed today, July 29th, 2022, a US$121 million Loan Agreement to develop, improve and expand the existing drinking water system in the eastern part of the city of Díli, which will benefit 82,380 people by connecting households to the drinking water network and installing meters in 12,482 homes.

“We all know that the city of Dili is currently facing many challenges in the social and environmental areas: for example, only three out of five people have access to drinking water; women and children waste a lot of time every day carrying water; this situation leads to many children not going to school and losing the opportunity to access education. This situation has been dragging on for many years”, said the Minister of Finance, Rui Gomes, in his speech at the opening of the ceremony.

“The drinking water problem in the city of Dili is very serious and increasingly complex because the population is increasing every year much faster than the rate of growth in the availability of services. Almost one-third of Timor-Leste's population is concentrated in Dili, and this means that our drinking water resources remain limited. Therefore, the signing ceremony of this US$ 121 million loan agreement is a reinforcement to respond to the problem that the city of Dili is facing, especially in the eastern part of the city”, emphasized Timor-Leste's State representative.

The project will begin in October this year and will last seven years, during which it will develop, improve and expand the drinking water distribution and piping system in the eastern part of the city of Díli, where the system is already very old and beyond repair. This strategic investment also aims to strengthen the management capacity and service delivery of Bee Timor-Leste, a public company that the Government created two years ago.

Strategic investment in the area of infrastructure, including drinking water, is an integral part of the Strategic Development Plan 2011-2030, an important document that is the basis of the eighth Constitutional Government's Programme. This plan also defines the modalities for strategic investment, including the modality through Public Private Partnerships (PPP).

In addition to the PPP modality, the eighth Constitutional Government continues to establish contacts with bilateral cooperation agencies (such as JICA) and with multilateral support banks (such as ADB and the World Bank) to obtain concessional loans with low-interest rates, with the objective of financing investment in infrastructure that will have an impact on the country's economic growth and ensure that the Petroleum Fund can last longer.

“The conditions of this loan from the International Development Association (IDA), worth US$121 million, make it very cheap. Cheaper by about 53% than our Petroleum Fund withdrawals. The World Bank's acceptance of these low-interest rates fits well with the social benefit and impact that the project will have on poverty reduction in the eastern part of Dili,” the Minister said in the Ministry of Finance Auditorium.

The minister also added that between 2012 and 2022, the Government received loan funds from ADB, World Bank and JICA amounting to US$ 731.5 million. Of this amount, the Government executed US$ 257 million, or 36%. Until last month, the Government has already paid US$ 20.3 million, as well as US$ 18.4 million in interest. The return on the investment in the Petroleum Fund, until May 2022, reached 4.33% per year. This value is higher than the cost of concessional loans, whose cost is only 1.57% per year.

The State representative also called for maximum support from the relevant ministerial lines, implementing agencies and local authorities to improve the quality of service delivery on the ground, to ensure that the strategic investment is executed according to the timelines set out in the terms of reference of this agreement so that it brings significant impacts and positive changes to the lives of the Timorese.

“On behalf of the eighth Constitutional Government and the Ministry of Finance, I would like to extend my sincere appreciation to the World Bank, ADB and JICA for their continued support in the drinking water sub-sector. This project is a visible mark of this strong partnership between the Government of Timor-Leste and the World Bank. The Government remains committed to maintaining good cooperation with the World Bank for the development of Timor-Leste”, concluded Minister Rui Gomes.

In this agreement signing event, Minister Rui Gomes was accompanied by the Vice Minister of Finance, the Vice Minister of Foreign Affairs and Cooperation, the Vice Minister of Justice and the President of Bee Timor-Leste.

Last week, the Council of Ministers had already authorized the Minister of Finance, on behalf of the State of Timor-Leste, to sign the US$ 121 million loan agreement with the World Bank for the project to supply drinking water to the eastern part of Dili city.