Tanzania is finalising the rating process for its debut Eurobond in December this year.

Finance Ministry Permanent Secretary Servacius Likwelile said the process has been delayed by a number of challenges but the country has since addressed the problems.

The process started in 2008 but stopped due to the global financial crisis.

Tanzania plans to float a Tsh1.1 trillion ($700 million) Eurobond to fund infrastructure projects.

The government has shortlisted three international sovereign rating agencies — Fitch, Standard & Poors and Moodys.

Dr Honest Ngowi, a researcher and economics lecturer at Mzumbe University, said Tanzania needs to put its house in order before floating the Eurobond.

Haji Semboja, a lecturer at the University of Dar es Salaam, said: “Tanzanians take too long to make decisions and other members of the East African Community are not happy. It delays developments.”

Mr Semboja said if Tanzania does not change tack it could find itself in a position where it is forced to comply with some tough conditions to strike a business deal.

Flexibility

Eurobonds are financing tools issued in a currency other than that of the country or market where they are listed.

They are attractive because they give issuers the flexibility to choose the country in which to offer their bond based on the regulatory constraints.

Rwanda became the first East African nation to raise money through a Eurobond, when it raised $400 million last year. Kenya recently raised $2 billion through a Eurobond.

READ: Kenya’s $2 billion Eurobond oversubscribed
Tanzania’s pursuit of the Eurobond has been a long-drawn out affair. It was expected to be issued in the 2012/13 financial year. In 2011, the government appointed Citibank Group of the UK through the Bank of Tanzania as a transaction adviser.

The plans to issue the bond were, however, shelved in the wake of shocks caused by the global economic crisis.

Last year, Tanzania said it planned to start opening up its capital account to enable it to attract more investments, starting with its East African Community partners before reaching out to the rest of the world by 2015.

Key issues to be considered in the credit rating process include economic growth rate, control of financial markets, inflation and balance of payment.
Lenders use credit ratings to determine a borrower’s credit risk.