Tanzania to seal a 1.6 Trillion – Eurobond Deal with HSBC

10 May


By A.Elinaza

Addis Ababa – TANZANIA may soon issue a debut Eurobond of between US$700 million (about 1.1trn/-) and US$1,000 (about 1.6trn/-) to finance infrastructure projects, especially roads.

The Head of the Directorate of Presidential Communication, Mr Salvatory Rweyemamu, said here yesterday 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 bilateral talks were held on the sidelines of the three-day World Economic Forum (WEF) on Africa that opened in this beautiful Ethiopian capital on Wednesday. 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,” Mr Rweyemamu told the ‘Daily News’. Prof Ndulu is also attending the WEF meeting.

Mr Rweyemamu said the government was currently allocating over a half of monthly revenue collection for the road fund. Monthly revenue collection is around 500bn/-.

“This is a big burden… which leaves other development projects without funds,” he said. At the moment about 11,000 kilometres of roads are under construction. In 2008, the country shelved its plans to issue a eurobond following global financial crisis.

In January, BoT’s Director of Economic Research and Policy Joe Masawe said talks between the government and IMF resulted into permission for the country to go for non-concessional loans because of the country’s modest debt ratio to GDP.

BoT picked Citigroup as its lead advisor on facilitating the issuance of 500 million US dollars Eurobond for infrastructure development.

A source in the Treasury had earlier this 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.

Tanzania has been criticised for lacking market openness by imposing foreign exchange restrictions and for not allowing foreign investors to purchase domestic fixed income securities.

Meanwhile, the Administrator of the United States Agency for International Development (USAID), Dr Rajiv Shah, told the President that US and Obama administration are committed to see SAGCOT (Southern Agricultural Growth Corridor of Tanzania) becomes successful and an example in Africa.

Dr Shah also proposed that SAGCOT should be reviewed after every six months by Tanzania, Ethiopia, Ghana, Mozambique, Kenya and Burkina Faso, development partners and private sector. The review should centre on parties commitment, especially on funding.

He also suggested establishment of a small secretariat to oversee SAGCOT which will be launched at the G8 summit in the United States later this month. US is among the first supporters of SAGCOT’s Catalytic Fund which have so far agreed to provide 60 million US dollars (about 96bn/-). SAGCOT target to lift about 2 million smallholder farmers out of poverty. FOR:


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