[ad_1]
According to a new report on the debt management strategy of the Ministry of Finance and Planning, the possibility of issuing two Eurobonds denominated in US dollars worth $ 800 million is seriously weighing right now.
which are expected to be sold in fiscal years 2019/20 and 2021/22, will each have a maturity of 10 years.
Tanzania is under pressure to quickly raise mbadive sums to finance several major public infrastructure projects, at the same time it is facing lower than expected tax levies and a sharp decline in capital inflows. Development partners in the form of grants and concessional loans.
Investor appetite for high-yielding African Eurobonds, and the fact that Tanzania finally won a sovereign rating, prompt the government to tap the international credit market to close the gap in funding gap . But the new report of the ministry, seen by the Financial Times, also warned against the pitfalls of borrowing in foreign currency through Eurobonds.
The current strategy of the government is to obtain 41% of its external financing, including concessional and commercial lenders, while 59% of loans are requested from lenders in the domestic market.
- is favorable because of substantial funding from concessional sources. However, the growing need to fund mega-strategic projects due to declining concessional sources arising from the changing global financial landscape makes this strategy less practical, "says the report.
The government believes that 39, issue of Eurobonds can help counter the decline in concessional loans, but it would cost more.
"Eurobonds can pose higher refinancing risks and tend to be expensive", warned the report.
Moody's Investors Service, a leading provider of credit ratings, awarded Tanzania a "B1" credit rating with a negative outlook in March of this year – the first once the country received a note from one of the major international agencies 19659002] Bridging the Infrastructure Gap
Although government officials criticized the Negative outlook of the ratings outlook, some badysts have noted that she was actually better than many other African countries.
However, some government circles fear that eurobonds offer a "quick fix" to some immediate infrastructure financing needs, but that international currency borrowings carry considerable risks compared to domestic currency borrowing. Another option the government is considering is to continue to develop domestic financial markets to enable it to borrow more local currency infrastructure funds.
The report says: "This strategy aims to minimize foreign exchange and refinancing risks on the public debt portfolio and to protect the country against vulnerabilities related to external financial shocks." However, it may increase the cost of debt. In addition, high domestic borrowing can crowd out private sector investment in a limited market absorption capacity. "
" In addition, high domestic borrowing can crowd out private sector investment in a limited market absorption capacity. "
In the last two years, commercial banks have been hit by soaring nonperforming loans, stifling credit growth to the private sector. President John Magufuli's government is implementing a handful of major infrastructure projects with the goal of transforming the country into a regional transportation hub and boosting economic growth.
In total, he wants to spend $ 14.2 billion over a five-year period to build a 2,561-kilometer normal track railway system (RGS) connecting the main port of Dar es Salaam to the rest of the country. countries such as the Democratic Republic of Congo (DRC), Zambia, Rwanda, Burundi and Uganda.
The construction of two sections of the Dar es Salaam RMS in Dodoma is already underway at a cost of more than $ 3 billion. after the government said that it would use its own funds to start building the railway because of delays in obtaining external loans.
Other major infrastructure projects implemented by the government include the Stiegler Hydroelectric Generating Station's Gorge. billion. Gas-fired power plants, airports, ports, roads and overflights are also under construction or expansion, hence the need to find more funding to bridge the gap.
Growing deficit, national debt
The government solicited low-interest loans from various external sources to finance the RMS project – notably China, Turkey, the African Development Bank ( ADB), the World Bank and other lenders – but has not yet managed to secure these funds.
He was forced to generate a larger budget deficit to finance infrastructure projects because tax revenues are insufficient to fund public spending, which means that the state has to borrow more money. 39; money. The budget deficit for the 2018/19 financial year is expected to reach 3.2% of gross domestic product, compared with 2.1% previously.
The stock of Tanzania's external debt reached about $ 20 billion by the end of April this year, of $ 18.65 billion recorded at the end of June 2017, according to latest data from the Bank of Tanzania (BoT). But the government insists that the national debt is still at sustainable levels.
"The debt sustainability badysis, conducted in November 2017 from end-June 2017 data, shows that the current value of the external debt-to-GDP ratio is 19.7%, which is below the threshold 40%, maintains Tanzania's debt at a sustainable level, "said the central bank in its latest monetary policy statement last week
. for public infrastructure projects. According to ADB estimates, the infrastructure financing gap is between $ 87 and $ 112 billion a year. This slows economic growth in a region that is one of the poorest in the world, despite vast mineral resources. Sub-standard roads, ports and airports increase the cost of exporting products and hinder intra-regional trade.
Experts say that much infrastructure development can be done by private companies instead of governments, but elusive public-private partnerships in Tanzania, as elsewhere in Africa.
If the government opts for the Eurobond route, it could be encouraged by the fact that the interest of investors, particularly the United States and Europe, in absorbing the Eurozone African bonds has been very high. oversubscribed, sometimes up to 10 times. In 1965, Zambia also received orders of $ 5 billion, while Rwanda's inaugural bond of $ 400 million in 2013 and the $ 500 million of 2014 and the $ 750 million bond Ivory Coast's dollars in 2014 were oversubscribed eight times, as was Kenya's $ 2 billion bond in 2014 that was oversubscribed four times. Kenya's latest $ 2 billion Eurobond issue released last February was also oversubscribed
Analysts warned that African countries that borrow heavily in dollars could fall back into the debt trap and eventually fail not repay their loans. Some African countries continue to argue that capital market funds, or sovereign bonds, are a cheaper alternative source of finance.
Source link
