Tanzania plans debut Eurobond of $500m-$1bn

Tanzania is planning to issue a Eurobond of up to $1 billion, but the issue could be delayed until after June, according to a report on Reuters. The newsagency quotes Benno Ndulu Governor of the Bank of Tanzania, saying the size has not yet been decided but could be between $500m and $1bn: “Anything up to a billion should make sense.”
The money raised could be used to build new roads, railways and ports and to help use the giant reserves of natural gas and coal to end chronic energy shortages. Infrastructure is a key challenge and Government is increasing borrowing. Tanzania’s gross domestic product is forecast to grow at about 7% in the medium-term, according to the African Development Bank, which says the main drivers of growth are telecommunications, transport, financial intermediation, manufacturing, construction and trade.
Ndulu also told Reuters that Tanzania is on course to rein in its large current account deficit. The Government’s target is 5% or below but the International Monetary Fund (IMF) estimated it at 13.5% in the fiscal year 2012/2013. Reuters quotes Ndulu: “We are working hard to bring it down back to 5% this year and I think we may be able to do that.”
According to a report last year on Making Finance Work for Africa, the Financial Times quoted former Minister of Finance William Mgimwa as saying Tanzania planned to ask the IMF to raise its debt ceiling by about $300 million for the 2013-2014 fiscal year, in a bid to issue the Eurobond, which he said would mature in 5-10 years and would be used on power generation and transport infrastructure. Although the economy is still dependent on foreign aid, an article in Jeune Afrique points out that investors are attracted by recent discovery of large reserves of natural gas off the coast. Tanzania offered $600m of 7-year securities in March 2013 which was 4x oversubscribed, reflecting its attractiveness to markets.
Bloomberg reported in November that Tanzania was busy with a credit rating and Finance Ministry Permanent Secretary Servacius Likwelile said they planned to raise $750m: “We plan to invest heavily in energy, road construction, water-supply development and airport construction.”
Bloomberg said it was in the final stages of a risk assessment by Citigroup Inc.and would then approach Standard & Poor’s, Moody’s Investors Service or Fitch Ratings for an assessment of the country’s creditworthiness, Tanzania had been discussing plans to obtain a credit rating and tap the Eurobond market since at least 2008.
It says Tanzania is Africa’s 4th biggest gold producer and together with bordering Mozambique has natural-gas reserves that could supply the global market for a decade. The country is selling sovereign debt to help finance infrastructure projects, including a gas pipeline from the southern Mtwara region to Dar es Salaam.
The credit rating is not yet finalized, according to a 31 Jan local news report in The Guardian/IPP Media, citing Finance Minister Saada Mkuya.

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