I'm all for the worrying about the IMF and I don't know anything about this deal (my fucking parents don't tell me anything other than what's happening with the family I guess), but it's not as bad as the article makes it out to be, which was annoying. Most people in Palau live on one tiny island which is probably less than 10 sqkm in area. There is one larger island but it isn't as inhabited, and the two are well connected (powered by the same diesel power plant). The VAST majority of the tiny islands are not even inhabited, without coast line, and the ones which are are considered like picnic areas.

One of the main issues I worry about is large infrastructure projects come usually from loans or aid from foreign sources, but we simply don't have the money to maintain them, so they tend to rot. Palau is subjected to rain almost constantly, with the extremely humid air rusting everything. I wish we'd take notes from more developers in South-East Asia who develop in very rainy, humid climates, but for some reason we seem to hire people from the west, which is great and all, but after driving over roads that form potholes less than a month after being completely replaced, it gets annoying.

EDIT: I should mention I'm a Palauan, at least my parents are.

In Arkansas, our roads are nothing but potholes. As soon as they are patched it rains (or as we say in the South, torrential downpours) and the entire road is a pothole again. Very annoying. It's always wet here and humid, btw. At least not as humid as Louisiana though.

I guess the difference is Palau has year round rain, not seasonal rains, so it's more akin to say Singapore than parts of the US, although may be LA or FL might be close, I don't know.

Another confounding problem with Palau it's an island in the Pacific. In the US, if you need to patch the road, you just send a couple of catepillar machines in an oversized truck down the interstate along with tar and whatever else to your small town. I mean, of course someone has the catepillars and tar lying around, but that's at least how it got there. For Palau, you need to get the tar, caterpillars, and fuel and everything else and send it on a cargo ship, whilst burning more fuel and putting it into the air. Just the sheer distance and isolation adds a huge cost to repair for everything that sort stretches the analogy with small town America for example.

The closest analogue in the US would be Hawaii, which is basically the Pacific island problem compounded by sheer remoteness (just about the only things more remote are French Polynesia, Easter Island, and random subantarctic islands, although I'm anchoring much of the South Pacific on places like Auckland, Brisbane, and Port Moresby). And as I've pointed out in the past, Hawaii is even higher cost of living than California, largely as a result of this middle-of-nowhere location.

I guess I'm curious how Polynesian islands manage it, but one thing about Hawaii has a robust economy while Palau does not unfortunately. Palau is heavily reliant of foreign aid, although it does have a tourism industry, it has faced some struggles. In a curious contradiction, HI is a US state, so federal funds being spent there are not really considered "aid" since they pay federal taxes, while Palau does not pay taxes to the US. Also, scale is different, Palau has less than 30K people, which makes it much smaller Hawaii and even many other Polynesian islands.

The curious thing is the cost of living isn't that terrible for things like land and food (which can be grown on the island). Of course, anything else including gas is expensive.

Palau is an interesting and unique place. I was lucky to vacation there maybe five years ago. I believe it has the world's best snorkeling and scuba diving. Despite tourism being probably being the major industry, this Island nation actually seemed to have a culture of independence - they'd just rejected a proposed development project from some billionaire.

I think they will be just fine. Loans to sovereign nations are more or less unsecured - the only threat an entity can make is cutting nation X off from world trade and "Palau doesn't care" - they recognize Taiwan and they take ex-Guantanamo prisoners.

Btw: Your comment involves no reference to any facts cited in the article and is merely assuming there's credit extension going on. The article make no reference to credit extension at all.