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| BoT twin-tower headquarters in Dar |
The Bank of Tanzania envisages signing soon a contract with Citigroup
over the issuance of the Eurobond issuance.
The central bank picked a US based bank as its lead advisor on
facilitating the issuance of 500 million US dollar Eurobond for infrastructure
development.
BoT's Director of Economic Research and Policy Joe Masawe told the
'Daily News' in Dar es Salaam over the weekend that the contract between the
two parts would be signed soon to pave way for the bond issuance.
The Citigroup will among other things advice and guide the country in
seeking a sovereign credit rating before the bond is officially issued.
"The (Euro) bond issue is on high gear," Dr Masawe said. The central
bank said recently that its talks with IMF resulted into permission for 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/-). BoT data show that national debt stock ballooned
to 12.53 bilion US dollar (20.05trn/-) in last October.
The BoT Director said, "The debt sustainability analysis shows
that the government borrowing level is far from the threshold pegged against
the GDP". He added that the low-level does not mean the country will
continue to borrow blindly but carefully to only projects which are viable with
good rate of returns to social welfare.
The Eurobond fund is expected to be channeled to developing projects like
hospitals, schools and infrastructure development - roads in particular.
However, economists are worried that given the state of the economy the country
might get a poor rating rate thus tarnish its ambition to issue an
international bond.
Key issues to be considered in the credit rating exercise include
economic growth rate, control of financial markets, inflation rate and Balance
of Payment (BoP). The economy is
expected to grow by six per cent while inflation is slightly below 20 per cent,
with the shilling trading at over 1,600 against US dollar. Last October current
account deficit widened by 65.4 per cent to 4.1 billion US dollar compared to a
deficit recorded in October 2010.
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.
Source: The Daily News,www.dailynews.co.tz, reported by Abduel Elinaza
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