Tanzania: Govt Renews Intention to Issue Eurobonds

Dar Es Salaam — THE government has renewed its intention to issue Eurobonds next year to finance infrastructure development in the country.

Before the credit crunch the government announced its intent to issue the sovereign bonds but the plan was put on hold last year following deterioration of global financial markets.

Eurobonds are sovereign bonds issued in a currency different to that of the country or market in which it is issued.

They 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.

In the aftermath of world economic recovery, some countries, including Kenya, announced this week their intentions to issue bonds next year for infrastructure projects.

Speaking to 'the Daily News', the Minister for Finance and Economic Affairs, Mr Mustafa Mkulo, said Tanzania was also in the process and 'right direction' towards that goal.

"We are also in the process and I can say we are in the right direction," said the Minister whose government wishes to put in the market bonds to raise 500 million Euros.

The money is expected to fund infrastructure projects such as roads, railways, power and port facilities.

The Director of Economic Research and Policies with Bank of Tanzania (BOT), Dr Joseph Massawe, said yesterday that by early next year Tanzania would seek international credit ratings before it issues the bonds.

Dr Massawe said the rating could take time but he is optimistic that the country would be able to float the bonds in the international markets.

"What will give us higher rating is stability of our economy, politics and our banking sector rating firms normally looks at how the country is committed to economic reforms," he explained.

Countries are credit rated to assess bond's default risk and prevention of possible financial crisis. Some of the world's reknown credit rating agencies include Standard and Poor, Fitch Rating and Moody's.

The government had planned to receive the rating by March this year but the plan was suspended last year after it was evident that markets were not favorable for such business.

Ghana and Gabon in 2007 became the first African countries outside South Africa to issue Eurobonds but issuance was much reduced last year against the backdrop of the credit crunch.

Source:allafrica.com/