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By Alawi Masare Oct 17, 2014 5:06 AM ET
Tanzania may borrow more to help finance its budget this year after foreign donors said they will withhold funding because of a corruption scandal, Finance Ministry Permanent Secretary Servacius Likwelile said.
The U.K., Japan, Germany and other development partners including the World Bank announced last week they will keep back about four-fifths of the $558 million pledged for the countrys 2014-15 budget. Foreign loans and grants account for about 15 percent of Tanzanias budget, and the withheld funds may derail major spending plans in an election year, said Ahmed Salim, senior analyst at Teneo Intelligence in Dubai.
I cannot discuss more details of the alternative financing plans, but we have borrowing arrangements with the central bank, Likwelile said in a phone interview on Oct. 15 from the commercial capital, Dar es Salaam. We can do more borrowing both internally and commercially.
Tanzanian Finance Minister Saada Mkuya Salum in June unveiled a 19.6 trillion-shilling ($11.6 billion) budget with plans to borrow 2.96 trillion shillings from the domestic market and about $800 million from external markets to help finance development projects. The country is expanding and building new ports, constructing power plants and laying roads under a 42.9 trillion-shilling five-year development plan to help it become a middle-income economy by 2025.
[h=2]
Payments Questioned[/h]Donors are withholding aid pending an investigation into how payments were made to Pan Africa Power Solutions Tanzania Ltd., a closely held company that acquired Independent Power Tanzania Ltd., an electricity producer, the Dar es Salaam-based Citizen newspaper reported on Oct. 8.
The decision by donors to withhold the pledged funds was a surprise to the government, which had already earmarked the money for development expenditure, Likwelile said. The Controller and Auditor-General has been assigned by parliament to investigate the issue, he said.
Tanzanias shilling depreciated for a third day, retreating 0.2 percent to 1,692 per dollar by 11:47 a.m. in Dar es Salaam. The currency is down 0.4 percent since Oct. 10, a sixth straight week of declines.
Donors had been expected to release about 90 percent of the pledged funds in the first quarter of the current fiscal year, which began on July 1, though so far theyve only disbursed about $71 million, Likwelile said.
[h=2]
Debut Eurobond[/h]We are learning one thing that we need to have strong local revenue collection to cover our budget and avoid unnecessary pressure like this, he said. The donor money was supposed to help in many development activities like health and the preparation for the next general elections.
The East African nation is scheduled to hold general elections next year.
Tanzania still expects to be assigned a sovereign credit rating by the end of the year as it works toward offering its debut Eurobond, he said. The government, which had planned to offer $700 million of debt in the financial year that ended on June 30, postponed the sale after a delay in getting a risk assessment slowed the issuing of the rating.
By December, the country will have achieved something on the rating, said Likwelile.
Tanzanias government expects the size of the economy to increase by a fifth after rebasing the countrys gross domestic product data to factor in expanding industries such as mining and natural gas. The revised data will probably be released by the end of this month, according to the government.
To contact the reporter on this story: Alawi Masare in Dar es Salaam at amasare@bloomberg.net
To contact the editors responsible for this story: Antony Sguazzin at asguazzin@bloomberg.netPaul Richardson, John Viljoen, Gordon Bell
Tanzania may borrow more to help finance its budget this year after foreign donors said they will withhold funding because of a corruption scandal, Finance Ministry Permanent Secretary Servacius Likwelile said.
The U.K., Japan, Germany and other development partners including the World Bank announced last week they will keep back about four-fifths of the $558 million pledged for the countrys 2014-15 budget. Foreign loans and grants account for about 15 percent of Tanzanias budget, and the withheld funds may derail major spending plans in an election year, said Ahmed Salim, senior analyst at Teneo Intelligence in Dubai.
I cannot discuss more details of the alternative financing plans, but we have borrowing arrangements with the central bank, Likwelile said in a phone interview on Oct. 15 from the commercial capital, Dar es Salaam. We can do more borrowing both internally and commercially.
Tanzanian Finance Minister Saada Mkuya Salum in June unveiled a 19.6 trillion-shilling ($11.6 billion) budget with plans to borrow 2.96 trillion shillings from the domestic market and about $800 million from external markets to help finance development projects. The country is expanding and building new ports, constructing power plants and laying roads under a 42.9 trillion-shilling five-year development plan to help it become a middle-income economy by 2025.
[h=2]
Payments Questioned[/h]Donors are withholding aid pending an investigation into how payments were made to Pan Africa Power Solutions Tanzania Ltd., a closely held company that acquired Independent Power Tanzania Ltd., an electricity producer, the Dar es Salaam-based Citizen newspaper reported on Oct. 8.
The decision by donors to withhold the pledged funds was a surprise to the government, which had already earmarked the money for development expenditure, Likwelile said. The Controller and Auditor-General has been assigned by parliament to investigate the issue, he said.
Tanzanias shilling depreciated for a third day, retreating 0.2 percent to 1,692 per dollar by 11:47 a.m. in Dar es Salaam. The currency is down 0.4 percent since Oct. 10, a sixth straight week of declines.
Donors had been expected to release about 90 percent of the pledged funds in the first quarter of the current fiscal year, which began on July 1, though so far theyve only disbursed about $71 million, Likwelile said.
[h=2]
Debut Eurobond[/h]We are learning one thing that we need to have strong local revenue collection to cover our budget and avoid unnecessary pressure like this, he said. The donor money was supposed to help in many development activities like health and the preparation for the next general elections.
The East African nation is scheduled to hold general elections next year.
Tanzania still expects to be assigned a sovereign credit rating by the end of the year as it works toward offering its debut Eurobond, he said. The government, which had planned to offer $700 million of debt in the financial year that ended on June 30, postponed the sale after a delay in getting a risk assessment slowed the issuing of the rating.
By December, the country will have achieved something on the rating, said Likwelile.
Tanzanias government expects the size of the economy to increase by a fifth after rebasing the countrys gross domestic product data to factor in expanding industries such as mining and natural gas. The revised data will probably be released by the end of this month, according to the government.
To contact the reporter on this story: Alawi Masare in Dar es Salaam at amasare@bloomberg.net
To contact the editors responsible for this story: Antony Sguazzin at asguazzin@bloomberg.netPaul Richardson, John Viljoen, Gordon Bell