Tanzania looks for funds after delaying sovereign bond sale
Tanzania’s government is exploring other sources of funding for road and power projects after the global credit crisis forced it to delay plans for a $500 million sovereign bond sale, Finance Minister Mustafa Mkulo said.
The east African country has approached lenders including the African Development Bank, and may seek funds from other governments, Mkulo said in an interview in Cape Town on Jan. 16.
Plans to sell the country’s first sovereign bond this year were put on hold after global credit markets seized up, boosting borrowing costs. The government still needs the funds to build power plants to ease an electricity shortage and construct roads and railways to help improve the country’s capacity to export gold and other minerals.
“Infrastructure still has to be financed,” Mkulo said. “These projects are needed in order to steer economic development of the country. I have to explore other sources to get the funding.”
Tanzania follows Kenya and Uganda in postponing plans to sell their first sovereign bonds this year. Kenya’s Economic Secretary Geoffrey Mwau said today the country may revive plans to sell a $500 million bond after countries including Brazil and Turkey sold securities last week.
Mkulo may make an announcement as early as February on an alternative source of funds for the country’s infrastructure projects, he said.
While the global economic recession has cut demand for commodities such as gold and diamonds, the economy may expand more than 7 percent in the fiscal year beginning July 1, Mkulo said. Expansion in telecommunications, mainly in the mobile- phone industry, and tourism will help to drive growth, he said.
Donor funds, which account for 34 percent of the budget, will also be sustained, providing the government with money for development projects, the minister said.
“We are confident of our growth forecasts even with the global financial crisis,” Mkulo said. “With donor funding being sustained, that gives us some assurance that we can continue spending on projects.”
Tanzania is Africa’s third-largest gold producer, after South Africa and Ghana. About 42 percent of the east African nation’s exports are comprised of minerals, mainly gold, diamonds and tanzanite, a rare gemstone only found over a five- kilometer (3.1 mile) strip near the foot of Mount Kilimanjaro.
Mkulo will probably make a decision on mining taxes before the June budget, he said. A presidential-appointed committee made a range of recommendations to the government last year on how to increase its revenue from mining royalties.
“The government is still working through the recommendations,” Mkulo said. “Whatever the agreement, I assure you it will be investor-friendly, but will also benefit the society.”
Toronto-based Barrick Gold Corp., the world’s largest gold miner, operates three mines in the east African nation and is set to open a fourth next year. AngloGold Ashanti Ltd. of South Africa and Australia’s Resolute Mining Ltd. also operate gold mines in the country.