Tanzania is on track to issue its first Eurobond next year to fund infrastructure projects after several years of delay due to various procedural requirements, Finance and Economic Affairs Minister, Ms Saada Mkuya Salum (pictured), said at the weekend.“We expect all the processes needed in floating the Eurobond to be ready by March, next year. We needed to put our house in order to avoid mistakes other Sub-Saharan countries did,” the minister said.
The minister did not say how much the bond would be worth, but the country had in the past said it planned to raise up to $1 billion (about 1.7tri/-), but this was delayed as it sought a credit rating.
The government has picked out three international sovereign rating agencies - Fitch, Standard & Poors and Moodys. Credit rating is important because lenders use it to determine borrower’s credit risk.
Key issues to be considered in the credit rating process include economic growth rate, control of financial markets, inflation and balance of payment.
Tanzania needed most the money to fund infrastructure projects, crucial for speeding up economic growth and achieve improved living standards.
According to analysts, the Eurobond would help fill up the gap amid the dwindling donors’ support of the development budget.
Eurobonds are attractive financing tools as they give issuers the flexibility to choose the country in which to offer their bond according to the country’s regulatory constraints.
Usually, a Eurobond is issued by an international syndicate and categorised according to the currency in which it is denominated. Tanzania’s plans of the Eurobond have been a longdrawn out affair.
The process started in 2008 but was postponed in the wake of global financial crisis. The process was restarted four years later and it was expected the country would issue the eurobond during the 2012/13 financial year.
In 2011, the government appointed Citibank Group of the UK through the Bank of Tanzania as transaction adviser. In 2007, Ghana became the first African beneficiary of debt relief to tap international capital markets, issuing a $750 million 10-year Eurobond.
Rwanda became the first East African nation to raise money through a Eurobond, when it raised 400 million US dollars last year and Kenya recently raised 2 billion US dollars through the debt instrument.
Source: Daily News, reported by Sebastian Mrindoko from Dar es Salaam, Tanzania
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