Tanzania has revived its plan to float a debut Tsh1.1 trillion ($700 million) Eurobond to fund infrastructure projects, especially in the gas sector. This is despite the country’s several failed attempts since 2008.

The EastAfrican has been reliably informed that the Ministry of Finance and Economic Affairs, during the financial year 2013/14, awarded a tender to Fitch, Standard & Poors and Moodys.

However, the companies declined the offer on the grounds that they were not ready to work under the conditions set by the country’s Procurement Act of 2011.

A source was not ready to mention the disputed clauses of the Act but he said the firms claimed that the law contravenes their company policies.

“Currently, we are trying to reach consensus so that we can work around their policy and our law without problems,” he said.

Bank of Tanzania senior advisor on economic research and policy Alex Ngwinanila said the process was revived again late last year after several attempts to get a rating agency failed. He said that currently the government was in the procurement process stage, but was yet to acquire a rating agency.

This is despite an announcement made last year by Finance and Economic Affairs Minister Saada Mkuya that the government expected all the processes needed for floating the Eurobond to be complete by March this year.

Mr Ngwinanila said that since the country appointed Citibank Group of the UK through the Bank of Tanzania as a transaction advisor, it is yet to get a rating agency.

“We are yet to get a rating agency, which is expected to determine at what level the country can be loaned and the risks involved,” he said.

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Eurobonds are attractive financing tools issued in a currency other than that of the country or market where they are listed because they give issuers the flexibility to choose the country in which to offer their bond, based on the regulatory constraints.

According to Mr Ngwinanila, the last attempt had been shelved to put the processes in good order and avoid mistakes, adding that they are optimistic that this time round things will go according to plan.

Bureaucracy

Commenting on the issue, a financial analyst who asked for anonymity said the government has failed to get a rating agency mostly because of bureaucracy. He said that normally a government is required to submit documents related to the country’s budget performance for the past 10 years as well as it debts management for the past five years.

“The government is also required to submit its obligations and debt sustainability performances, which are normally compared with other countries before the process can be effected,” he said.

According to the analyst, Tanzania was aiming for a benchmark rating of at least BB that both Kenya and Ghana achieved, adding that the rating is good especially on factors related to risks involved.

The country started the process of floating a Eurobond in 2008 but the plans were postponed due to the global financial crisis. The process was restarted four years later and the government had planned to issue the Eurobond during the 2012/13 financial year.

Ghana became the first African country to issue a $750 million 10-year Eurobond in 2007. In East Africa, Rwanda became the first country to raise money through a Eurobond for the amount of $400 million last year followed by Kenya, which recently raised $2 billion.