Tanzania has secured a $250 million seven-year loan from a consortium of local and global financiers, to fund roads and rural electrification.
The Tanzanian government said it opted for this route as it is cheaper and the loan approval process faster, compared with issuing a bond on the international market.
Negotiations with various local commercial banks began late last year as the government sought to secure loans for infrastructure projects and plugging the budget deficit for the 2010/2011 financial year.
Mustafa Mkulo, Minister for Finance and Economic Affairs, said the government’s decision to raise funds from the loan market was a first step towards diversifying sources for its long term financing needs, key to which is infrastructure development.
Stanbic Bank Tanzania and its parent company Standard Bank Group of South Africa, are the lead financiers in the consortium.
Other contributors are the Local Authority Provident Fund, the National Social Security Fund, Parastatal Pension Fund, Government Employees Provident Fund, CRDB Bank and Bank of Africa Tanzania.
International partners include Standard Bank Group, RMB Bank of South Africa, Sanlam, Zep RE and East African Development Bank.
Stanbic Bank Tanzania managing director Bashir Awale said the loan was split into three portions.
Standard Bank and Stanbic Bank Tanzania were the global co-ordinators of the three tranches.
This is the first time an African government is sourcing non-concessionary commercial financing directly from the market without taking the sovereign bond route or the rating process.
The full transaction will cost 5.28 per cent per annum.
This is in comparison with the five-year Senegal sovereign bond which was issued at 8.75 per cent, the Ghana 10-year sovereign bond issued at a coupon rate of 8.5 per cent and the Nigerian sovereign bond issued at a coupon rate of 6.75 per cent per annum.