Tanzania sees Eurobond next year after rating

LONDON (Reuters) - Tanzania expects a sovereign rating by March and will aim to issue a Eurobond but also fears a slight financial hit from the global economic crisis, a senior finance ministry official said on Wednesday.
Finance Ministry Commissioner for Policy Analysis Mugisha Kamugisha told Reuters the money borrowed would be used for infrastructure projects including transport, power and port facilities -- but that the Eurobond issue would be dependent on an improvement in global market conditions.
Ghana and Gabon last year became the first African countries outside South Africa to issue Eurobonds but issuance has been much reduced this year against the backdrop of the credit crunch, drying up completely in recent weeks as credit markets froze and economic turmoil worsened.
"We expect our rating by March next year," Kamugisha said on the sidelines of an investment conference in London. "The plan is then to have the bond issuance in the course of next year. We hope by then there will be calm in the markets. We have not yet decided how much it will be but probably more than $500 million."
Tanzania is among Africa's largest recipients of aid and received $336 million in debt relief from the International Monetary Fund under the Highly Indebted Poor Countries programme, helping it reached the point where it has been touted as one of Africa's more appealing frontier markets.
But with interest in emerging markets collapsing as Western investors dump any perceived risk from their portfolios and with Western governments forced to spend billions bailing out their own banks, Tanzania would feel a pinch from the economic crisis, he said.
"We think there will be an impact on overseas development aid, foreign direct investment and I'm also worried about tourism," he said. "We know that foreign governments will be using more of their own resources to stabilise their own financial systems."
Foreign aid made up 20 percent of Tanzania's budget and 10 percent of gross domestic product, he said, but still expected donors such as Britain's Department for International Development to meet existing commitments covering the next few years.
Tanzania still foresaw economic growth of more than 7 percent this year, he said, but now expected to not quite meet its previous prediction of 9.2 percent in 2009.
"But I would have thought we should still see maybe 8.7 percent," he said. "Certainly more than 8 percent. And we still hope for double digit growth in 2010."
Investor demand for gold as other assets crumbled in value would help support that part of the mining sector, he said, although it was only a small part of the wider economy.