Offshore oil and gas exploration platforms in the Indian Ocean. Tanzania has discovered huge offshore gas deposits, but production is yet to begin. Photo/FILE
President Jakaya Kikwete has said that Tanzania aims to launch its debut Eurobond worth at least $700 million in the financial year starting July and could seek more if conditions were favourable or delay if costs were too high.
President Kikwete said he was also trying to meet a budget deficit target of five per cent of gross domestic product in 2013/14 - down from 6.2 per cent the previous year - but he said it would be tough due to an expected six per cent shortfall in revenues.
“We have been working on $700 million (for the Eurobond), we will see if we can go higher than that,” he said, although he added: “We cannot say let’s borrow at any cost,” President Kikwete said in Dar es Salam on Friday as part of the Reuters Africa Investment Summit.
Tanzania’s economy has been growing steadily at about seven per cent a year, one of the fastest in the region, but it breached last year’s deficit target of 5.5 per cent - a level that had been agreed with the International Monetary Fund.
“We have a target of getting to five per cent this year. We are working hard towards that but of course it’s a tall order, but we are determined to get there,” he said.
How Tanzania fares in controlling the deficit will be watched closely ahead of plans for the Eurobond.
Pricing for emerging market issuers has been climbing since the United States scaled back its bond buying programme that had prompted investors to rush into higher-yielding developing markets, including other African nations such as Rwanda.
Zambia last week raised $1 billion from a 10-year dollar-denominated bond, paying an interest rate of 8.625 per cent. This was significantly higher than the 5.625 per cent it achieved when it issued its first bond two years ago.
Tanzania, where many in the nation of 45 million are still mired in poverty, could see its fortunes change in a few years because of huge offshore gas finds.
Several major energy firms are involved such as BG Group, Exxon Mobil and Statoil although production has yet to start.
In preparation, the government has drawn up a new gas policy that outlines plans for a sovereign wealth fund to manage any windfall. The policy also aims to balance demands by energy firms to export gas with the needs of the domestic market.
Legislation for the new fund would be presented to a new parliamentary session in October, the president said.
“We have been trying to press upon the industry that they should also think of the local market. Not all the gas should be exported,” he added, citing gas needs for power plants and factories. But he said Tanzania was not setting quotas for use.
The government, which relies on aid, is trying to become a more attractive investment destination, after it slipped further down the World Bank’s rankings on the ease of doing business. It dropped nine places to 145 in 2014 out of 189 countries.
As well as seeking to cut red tape and address other bureaucratic obstacles, the president said the authorities were working on raising the limit for foreign ownership of listed companies, now set at 60 per cent.
“We are working on it,” he said, adding he expected the level to increase by 2015 although he did not say by how much.
