Washington Gikunju
27 August 2008
Dar es Salaam — Tanzania has announced plans to issue an international bond to raise money for infrastructure financing.
With the move, it joins a growing list of African countries- including Kenya- seeking to tap into the international markets to finance their development plans.
Government officials in Dar es Salaam are already laying the groundwork for the sovereign bond issue, following last week's announcement by President Jakaya Kikwete of the planned issue in a speech made to the country's Parliament.
Mr Kikwete, currently on tour of the United States, told parliament that the American Government had promised to assist Tanzania get a sovereign debt rating, a prerequisite for any international bond issue.
The international Monetary Fund (IMF) director- fiscal affairs Ms Ter-Minassian said Tuesday in a public lecture at the Dar es Salaam International Conference Center that IMF would provide the necessary technical assistance to assist Tanzania float the bond.
The lecture was attended by high ranking IMF and Government officials, and the country's top private sector executives.
Kenya's plan to float an international infrastructure bond remains on course, with Treasury official Henry Rotich confirming earlier this month that the Government's target was to issue the bond within the current financial year.
International credit rating agency Standard and Poor's upgraded Kenya's outlook rating to stable from positive earlier this month, and affirmed the long term credit rating of B+.
Kenya expects to raise $500 million (about Sh33 billion) through the issue.
Ms Minassian said financing development projects through sovereign bond issues would assist Tanzania expand its fiscal space.
Domestic tax revenue collections have grown to about 17 per cent of the GDP in 2007/08, indicating that the country still has room to raise more tax revenue.
Total Tanzanian public expenditure budget has grown from 17 per cent of the GDP in 2000/01 to about 23 per cent in the 2007/8 financial year.
With a population of about 40 million people and an agricultural based economy, Tanzania is still among Africa's largest recipients of aid.
The country benefited from debt relief from the IMF to the tune of $336 million under the Highly Indebted Poor Countries programme.
The issuance of a sovereign bond would however necessitate wide ranging economic reforms to open up sectors of the economy that are still under Government control.
Such reforms include lifting Government current account control which limits foreign exchange transactions and restricts sale of Government securities to foreigners.
Be the first to Write a Comment!
Copyright © 2008 The Nation. All rights reserved. Distributed by AllAfrica Global Media (allAfrica.com). To contact the copyright holder directly for corrections — or for permission to republish or make other authorized use of this material, click here.
AllAfrica aggregates and indexes content from over 125 African news organizations, plus more than 200 other sources, who are responsible for their own reporting and views. Articles and commentaries that identify allAfrica.com as the publisher are produced or commissioned by AllAfrica.
