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| Mr Kitua |
The regulatory framework for the initiation of the municipal bonds to
enable local government authorities raise funds for development projects at
relatively cheap prices is expected to come into effect in a four-month time.
Dar es Salaam Stock Exchange (DSE) Chief Executive Officer Gabriel
Kitua, said in the city on Tuesday that Kigamboni project and four city
councils—Dar es Salaam, Arusha, Mbeya and Mwanza—would qualify for the bond
facility, thanks to their financial muscles.
Investors who buy municipal bonds are in effect lending money to the
bond issuer in exchange for a promise of regular interest payments, usually
semi-annually and the return of the original investment.
The principal Mr Kitua, said the
bond issuance will increase local governments’ transparency in funding
infrastructure development projects and social welfare programmes as well as
avail long-term loans for capital intensive projects—roads, hospitals and
schools.
The municipal councils will be obliged to first repay the loans in their
revenue collections, to minimise the default risk, Mr Kitua said.
Presenting the budget estimates in Dodoma last week, the Minister for
Lands, Housing and Human Settlement Development, Prof Anna Tibaijuka said the
government will start using municipal bonds to raise funds for the Kigamboni
new city project which is estimated to cost 11.6trn/- in three phases.
"We will be using modern techniques specifically municipal bonds
to raise over 605bn/- outside the budget to implement the first phase of the
long awaited project within a time frame," Prof Tibaijuka said.
She said over 60bn/- has been set aside for this financial year to
implement the first phase of the unit project.
The new city master plan seeks to provide sufficient infrastructure
such as residential, commercial, trade and business, industrial, educational
and tourism facilities.
The government through the assistance of the World Bank (WB) has
identified a consultant in the two-phase municipal bonds study to assist in the
preparation of the legal and institutional framework for issuance of the debt
security.
The first phase of the project
strived to establish the feasibility and required policy changes for a thriving
municipal bonds market in Tanzania.
The second phase pursued to develop the legal and operational framework
for the municipal bonds markets in the country.
In March 2009 the consultant was recruited to perform the first part of
the municipal bonds study the main objective of the study being to review the
current and recommend a future appropriate legal, institutional and policy
framework to establish viable municipal bond markets.
Source: The Daily News,http://www.dailynews.co.tz, reported by Sebastian Mrindoko
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