[etni] A grammar question

We came across this sentence and had difficulty explaining the the correct answer. Maybe someone can help me ?
We were teaching condition I and condition II. The student had to complete the second sentence: 

I don't intend to lend him any money.
If I ________________(do),  he ______________(waste) it all again.
Most of us said the answers are " do" and "will waste" making it a condition I sentence because of the "again" showing that it refers to the future.
One teacher said it should be "did" and "would waste" making it a condition II sentence because it is unreal because the speaker does NOT intend to lend the money.
How would you answer and more importantly-- how would you explain the answer? 

Thank you   Fruma

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