- Government will be guided on what is needed on Eurobond
- Yields on bonds, treasury bills should keep going down
Tanzania plans to borrow offshore in the next fiscal year, central bank Governor Benno Ndulu said.
“We will be guided by what’s needed and what is reasonable in the market to do,” Ndulu said in an interview Wednesday at the World Economic Forum on Africa in the Rwandan capital, Kigali. The “firm numbers will still come out. If it’s a Eurobond, typically you cannot issue less than $500 million.”
The east African nation’s government has previously delayed the sale of bonds on international markets. It’s been discussing plans to obtain a credit rating and tap the Eurobond market since at least 2008. The authorities have abandoned plans to borrow from international lenders because of poor credit conditions, Finance Ministry Permanent Secretary Servacius Likwelile said in December.
“We have already seen yields for treasury bills and bonds going down,” Ndulu said. “I think they will keep on going lower down” in the next two months.
The International Monetary Fund’s first deputy managing director David Lipton said on Tuesday African nations should avoid falling into debt due to inefficient infrastructure projects. Tanzania has been cautious on issuing debt to fund such projects, Ndulu said.
“We know others that have gone full-scale on that, we know what they are going through now. Virtually you get into a state where you are always chasing rollovers,” he said. “Sometimes they are being forced to issue at whatever cost just because obligations are coming, we don’t want to get to that situation.”
Tanzania has announced plans for an $7 billion upgrade to a railway line on its so-called Central Corridor of transport and logistics infrastructure. It will also help build a $4 billion pipeline connecting its Tanga port to Ugandan oil fields and will invest in a planned 60,000 barrels-of-oil-a-day refinery in its neighbor.
While credit rating companies already assess the $48 billion natural-gas producing economy, they don’t issue a formal assessment, Ndulu said. The government will finalize the procurement process to obtain a ranking from two of the agencies in the next few months.
“This is the next thing that has to be concluded, if we are planning to issue for next year’s budget,” he said. “Most of the ground work has been done.”
The Tanzanian currency, which has weakened 2 percent against the dollar this year, extending losses of 19 percent in 2015, is fairly valued, Ndulu said.
“It’s about right, given where the dollar is.”