Yesterday in London, our Finance Minister Khamis Mussa Omar told investors that a Eurobond is "an option on the table" to help cover Tanzania's external borrowing needs of around $1 billion. A government advisor put the maximum size at $500 million.
On paper, it sounds like graduation day, Tanzania finally joining the big leagues of international capital markets. But I've been sitting with the numbers, and I think we need to talk before we celebrate.
First, this is the most expensive money we can borrow. When Kenya returned to the market in 2024, it paid a 9.75% coupon. Even in this year's friendlier market, Kenya's February issuance priced at roughly 8–9%, and Ivory Coast, with years of market credibility, got 7.1%. As a first-time issuer, Tanzania would pay a debut premium on top of that. Meanwhile, World Bank and AfDB concessional loans cost us in the low single digits with long grace periods. On $500 million, the difference is roughly $40 million in extra interest every year. That is dispensaries, teachers, and rural roads, paid to bondholders in London and New York, for nothing.
Second, it undermines the exact thing we were just praised for. In March, Fitch affirmed our B+ rating and specifically credited Tanzania's high share of cheap concessional borrowing for keeping our debt sustainable, while warning that 68% of our debt is already external and exposed to exchange-rate risk. Two-thirds of that external debt is already in US dollars. So the plan is... to add more debt in dollars?
Third, the government is contradicting itself in the same week. Today at the London Stock Exchange, Tanzania is launching its first shilling-denominated offshore bond with the IFC, a clever structure that shifts currency risk onto investors rather than us. That is smart policy. A dollar Eurobond does the exact opposite. Which strategy are we actually following?
Fourth, look at the graveyard. Ghana, Zambia, Ethiopia; all defaulted or restructured after their Eurobond adventures. Kenya's $2 billion 2024 maturity nearly became a full crisis; at one point that bond was trading above 18%. Tanzania's restraint has been our quiet superpower in this region, the reason our debt of Sh114 trillion is still called "sustainable." Why spend that advantage now?
Fifth, and most importantly: Why the debt? The Minister did not mention a railway, a port, or a power plant. He said "external borrowing needs" - in other words, filling a hole in the budget. Borrowing commercially at 8%+ to fund recurrent spending is precisely the pattern that preceded every African debt crisis of the last decade. And unlike a World Bank loan, Eurobond cash arrives with no project appraisal, no procurement safeguards, no disclosure requirements. Ask Mozambique how that story ends.
To be fair to the government: concessional money is shrinking as we approach middle-income status and donors cut aid, so building market access before you desperately need it has real value; Kenya learned that the hard way. And a $500 million cap suggests caution, not a binge.
But if we must test these waters, shouldn't it be for a named, revenue-generating project, not an unnamed gap in the budget? And shouldn't Parliament be asking that question loudly before any roadshow begins?
On paper, it sounds like graduation day, Tanzania finally joining the big leagues of international capital markets. But I've been sitting with the numbers, and I think we need to talk before we celebrate.
First, this is the most expensive money we can borrow. When Kenya returned to the market in 2024, it paid a 9.75% coupon. Even in this year's friendlier market, Kenya's February issuance priced at roughly 8–9%, and Ivory Coast, with years of market credibility, got 7.1%. As a first-time issuer, Tanzania would pay a debut premium on top of that. Meanwhile, World Bank and AfDB concessional loans cost us in the low single digits with long grace periods. On $500 million, the difference is roughly $40 million in extra interest every year. That is dispensaries, teachers, and rural roads, paid to bondholders in London and New York, for nothing.
Second, it undermines the exact thing we were just praised for. In March, Fitch affirmed our B+ rating and specifically credited Tanzania's high share of cheap concessional borrowing for keeping our debt sustainable, while warning that 68% of our debt is already external and exposed to exchange-rate risk. Two-thirds of that external debt is already in US dollars. So the plan is... to add more debt in dollars?
Third, the government is contradicting itself in the same week. Today at the London Stock Exchange, Tanzania is launching its first shilling-denominated offshore bond with the IFC, a clever structure that shifts currency risk onto investors rather than us. That is smart policy. A dollar Eurobond does the exact opposite. Which strategy are we actually following?
Fourth, look at the graveyard. Ghana, Zambia, Ethiopia; all defaulted or restructured after their Eurobond adventures. Kenya's $2 billion 2024 maturity nearly became a full crisis; at one point that bond was trading above 18%. Tanzania's restraint has been our quiet superpower in this region, the reason our debt of Sh114 trillion is still called "sustainable." Why spend that advantage now?
Fifth, and most importantly: Why the debt? The Minister did not mention a railway, a port, or a power plant. He said "external borrowing needs" - in other words, filling a hole in the budget. Borrowing commercially at 8%+ to fund recurrent spending is precisely the pattern that preceded every African debt crisis of the last decade. And unlike a World Bank loan, Eurobond cash arrives with no project appraisal, no procurement safeguards, no disclosure requirements. Ask Mozambique how that story ends.
To be fair to the government: concessional money is shrinking as we approach middle-income status and donors cut aid, so building market access before you desperately need it has real value; Kenya learned that the hard way. And a $500 million cap suggests caution, not a binge.
But if we must test these waters, shouldn't it be for a named, revenue-generating project, not an unnamed gap in the budget? And shouldn't Parliament be asking that question loudly before any roadshow begins?
