Tanzanian investors go for T-bills and bonds
Saturday November 14 2020
Investors in Tanzania prefer securities with long tenure. PHOTO | FILE
Investors in Tanzania have shifted their interest from external to internal borrowing in an increasing appetite for Treasury securities.
Recent data from the Bank of Tanzania (BoT) shows that the stock of domestic debt was Tsh15.315 trillion ($6.55 billion) in September 2020, a Tsh152.5 billion ($65.27 million) increase from the preceding month.
Year-on-year, internal borrowing has increased by Tsh1.255 trillion ($537.16 million) from September 2019.
Tanzania domestic debt stock stood at Tsh14.06 trillion ($6.017 billion), in September 2019, rising to Tsh15.16 trillion ($6.49 billion) in August 2020, and to Tsh15.31 trillion ($6.56 billion) the following month. According to BoT, the increase in debt was mostly through issuance of government debt securities in the form of Treasury bills and bonds.
“This is in match with investors’ preference for long tenures of debt securities and more prominent in issuance of Treasury bonds, consistent with the government medium-term debt strategy of lengthening maturity to reduce refinancing risk,” stated the central bank in its Monthly Economic Review for October.
The Tanzanian government bond market is generally not open to foreign investors.
Data shows the overall debt-to-GDP ratio is 37.8 percent. In 2019, GDP in Tanzania stood at $63.18 billion, according to figures from the Central Bank, the World Bank and Trading Economics.
Government securities issued for budgetary operations on the other hand amounted to Tsh421.1 billion ($180.238 million) in September 2020, of which Treasury bonds stood at Tsh322.7 billion ($138.1 million) and the balance Tsh98.4 billion ($42.1 million) was Treasury bills.
“Domestic debt service, excluding government overdraft from the BoT, accounted for Tsh345.6 billion ($147.9 million) of which Tsh219.0 billion ($93.735 million) was principal repayment and the balance was interest payment,” stated the bank.
On the creditor's counter, commercial banks continued to hold the largest share of domestic debt, accounting for 36.8 per cent of the domestic debt, about Tsh5.639 trillion ($2.43 billion), followed by pension funds with Tsh4.618 trillion ($1.99 billion) about 30.2 percent.
Meanwhile, external debt stock decreased to $23.32 billion at the end of September 2020, representing a drop of $49.1 million on a monthly basis, but increased by $947.8 million from September 2019. The decrease in debt was mainly on account of net debt outflows. “In September, 2020, disbursements of external loans amounted to $36.4 million, of which $35.7 million was in favour of the central government. The debt service was $120.8 million, of which $105.6 million was principal repayment,” states BoT’s October review.