Tanzania: Citibank to Advise Govt On Eurobond Issue

Dar es Salaam — Tanzania has appointed Citibank in the UK as a transaction adviser as the country plans to issue a $500 million Eurobond early next year, the Finance and Economic Affairs ministry permanent secretary has said.
Mr Ramadhan Khijjah told BusinessWeek recently that if the plan succeeds the funds generated would be used in financing infrastructure projects ranging from road building, expanding ports and increasing power generation.

"It's just yesterday (Monday, July 4) through, the Bank of Tanzania tender board, we appointed Citibank as a transaction adviser," Mr Khijjah told BusinessWeek on telephone.
According to him, the advisor will guide the country in seeking a sovereign credit rating who will then advise the country on a number of other issues before the bond is officially issued during the first quarter of 2012.
The country shelved plans to issue a $500 million sovereign bond over the past two years after the global economic crisis squeezed credit markets and raised the cost of borrowing.
"We would have liked it earlier but that is the tentative time they have given us. And there is no need to rush for we might end up getting bad ratings."Key issues to be considered in the credit rating exercise include economic growth rate, control of financial markets and inflation rate and balance of payment. Credit rating will help investors and creditors to get information regarding Tanzania's economic and political situations as well as on governance.
Non-Concessional borrowing
According to Mr Khijjah however, the government would continue looking at other foreign sources for Non-Concessional borrowing before going for a Eurobond issuance.Presenting this year's fiscal budget in June, Finance Minister Mustafa Mkulo said the country planned to borrow in which $1.5 billion in the period of three years 2010/11 - 2012/13.Therefore, $822 million (Sh1.27 trillion) is expected to be disbursed in 2011/12.
"Out of that $297 million (Sh459 billion), is balances from the anticipated loans from the previous financial year and a total of $525 million (Sh812.2 billion) is expected to be used in year 2011/12 for infrastructure projects," he told the parliament.


Bank of Tanzania Governer Benno Ndulu Ndulu said Tanzania plans to issue a $500 million debut Eurobond in this fiscal year, after it gets a sovereign rating. He said Tanzania hoped to get a credit rating of B+. With a B+ credit rating, Tanzania will be able to move ahead with issuance of the bonds because the rating indicates that the country will be able to repay the money.
If it succeeds, Tanzania will be joining other African nations such as Zambia, Angola, Rwanda and Kenya that plan to raise capital in global markets.Early this month, Kenya- East Africa's biggest economy, announced to revive it three-year shelved plans to sell at least $500 million of Eurobonds in the next fiscal year that begins July, 1, 2012.
Kenya is rated B+ at both Standard & Poor's and Fitch, which is four steps below investment grade and on par with assessments assigned to Cape Verde, Zambia and Georgia.