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Tanzania eyes Eurobond

January 4, 2013 Daily News
TANZANIA is keen to issue a debut Eurobond to finance its infrastructure
development projects, especially its vast roads and rail network.

"We are keen on this to be done as soon as possible, perhaps later this
year or next year, but there were some technical matters that are
currently being worked out," the Minister for Finance and Economic
Affairs, Dr William Mgimwa, told the 'Daily News'.

However, the minister did not elaborate on technicalities being worked
out, stressing that a team of local experts and a consultant were
handling the matter.

"It is true that the signing of the contract with the consultant has
been long overdue but the government is vigilant to ensure that Eurobond
plan is successful," Dr Mgimwa said in an interview.

In April, last year, the government announced that the country might
soon issue a debut Eurobond of between US$700 million (about 1.1trn/-)
and US$1,000 (about 1.6trn/-) to finance infrastructure projects. A
senior government official was quoted as saying that HSBC, Europe's
largest bank, has agreed in principle to facilitate the process.

The agreement on issuing of the Eurobond with pay-back period of between
50 and 60 years was reached during talks between President Jakaya
Kikwete and HSBC Chief Executive Officer (CEO) for South Africa and
co-head of Africa sovereigns, Mr Andrew Dell.

The bond will be issued once the Bank of Tanzania and other relevant
institutions have laid-down the conducive environment for securing the
loan, including rating. "The president has directed the Central Bank
Governor (Prof Benno Ndulu) to complete all relevant conditions that
will lead to the issuance of the bond as soon as possible," the official
said.

The government allocates over a half of monthly revenue collection for
the road fund. Monthly revenue collection is around 500bn/-. In 2008,
the country shelved its plans to issue a eurobond following global
financial crisis.

A source in the Treasury had earlier last year said that it would take
between one year or 24 months until the Eurobond is finally issued. "We
don't think we can go below category B in the credit rating," he said.
However, some financial analysts say the country's large fiscal deficit
and significant structural current account shortfall present downside
risks to the rating process.