The Bank of Tanzania (BoT) has said the country rating process is expected to be completed by early next year following the appointment of Citigroup as the lead advisor on the exercise.
The central bank said the commencement of sovereign rating implementation awaits the agreement signing between the government and Citigroup. BoT's Director of Economic Research and Policy Dr Joe Masawe told the 'Daily News' that "very soon" the contract between the two parts would be signed to pave way for the issuance of sovereign bond.
"Citigroup is now an official country advisor on the rating process," Dr Masawe said, "we expect the process to be completed next year." The Director, however, said the bank has been also advised to engage other banks in the rating process. "We expect that they will also engage other commercial banks in the process," Dr Masawe said.
In May, HSBC, Europe's largest bank, told the President was ready to backup the issue of the Eurobond of between 700 and 1,000 million US dollars (between 1.1trn/- and 1.6trn/-). The international bond geared to finance infrastructure projects, especially roads, with pay-back period of between 50 and 60 years.
In January, BoT said IMF has permitted the country to go for non-concessional loans because of the country's modest debt ratio to GDP. The country's debt to GDP ration stands at 15 per cent while the threshold level is 50 per cent of net present value. The GDP is around 60 billion US dollar (96trn/-).
Key issues to be considered in the credit rating exercise comprise economic growth rate, control of financial markets and inflation rate and Balance of Payment (BoP). However, economists are worrying that given the state of the economy, low tax collection ratio to GDP and ballooning of national debt, the country might get a poor rating rate thus tarnish its ambition to issue an international bond.
"Short of that (collecting more taxes) the country's creditworthiness will be highly reduced," Dr Honest Ngowi, an Economist with Mzumbe University, said. The economy is expected to grow by 6.8 per cent in 2012, the inflation is slightly below 20 per cent, exchange rate stands at between 1,560/- and 1,590/- a US dollar. The country shelved plans to issue the sovereign bond over the past two years after the global economic crisis squeezed credit markets and raised the cost of borrowing.