Lack of municipal bonds starve local governments

Dar es Salaam Stock Exchange executive director speaks at a past event in relation to securities, bonds and stocks. Local authorities are yet to use the Bourse to raise capital they need for implementation of their development plans. Photo | File 

By Ludger Kasumuni,The Citizen Reporter

In Summary

• At the bourse, only central government dominates in mobilising funds for the treasury through listing bonds, while the local governments have no such chances

Dar es Salaam. Lack of local governments’ participation at the Dar es Salaam Stock Exchange (DSE) through municipal bonds denies them opportunity to raise enough funds for implementing development projects in the municipal and district councils.

At the bourse, only central government dominates in mobilising funds for the treasury through listing bonds, while the local governments have no such chances causing over-dependency on central government resources for implementing various projects.

Speaking on Friday during the media training seminar on financial reporting, the DSE chief executive officer, Mr Moremi Marwa said that there was a need to put in place institutional and regulatory frameworks for allowing local governments to raise funds through listing municipal bonds at DSE.

“I know that there is a law which empowers the ministry of finance to raise funds through treasury bonds market but it can be amended to allow municipal bonds to operate at the DSE. There is no doubt that this can be successfully practiced,” said Mr Marwa.

He said in the US the municipal bonds listed at the stock markets have been vital for mobilizing resources needed to implement various economic activities of local governments.

“The private sector and local governments in the US normally engage in the listed bonds markets but here it is not happening. It is also important that for local governments to participate effectively at the stock market must adhere to good corporate governance,” Mr Marwa said.

The DSE is dominated by government bonds that comprises 98 per cent of total bond market and corporate bond with only two per cent coverage, he said.

 

The DSE manager for market research and development, Mr Ibrahim Mshindo also supported that since the treasury bonds in several occasions have been oversubscribed there was a possibility for municipal bonds to operate actively at the stock market.

Mr Mshindo said through expansion of DSE products like municipal bonds it was possible for Tanzanians to access funds for financing long term development projects