4 January 2013

Tanzania Keen On Eurobond Plan, Says Minister

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.

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