Tanzania: Bot Takes More Funds From Debt Instrument

By Abduel Elinaza

THE Bank of Tanzania (BoT) has accepted more funds above the amount sought to be raised through the government securities auctioned in the

last three consecutive trading sessions.

The government raises funds through various debt instrument to fund the long term development projects that will start generating income before the instrument matures.

Some of the long term infrastructural projects that benefit from the funds include hydropower, roads, railways, bridges, ports, airports as well as social services like hospitals and schools.

The implementation of the projects would stimulate business growth, contribute to improved living standards and the government collects more revenue.

Orbit Securities said in its weekly synopsis that BoT seems comfortable with current yields and interest rates as seen in the last three Treasury auctions where it accepted more than offered, thus supporting the yields.

"The Bank achieves two main objectives with the move," to secure fund for budgetary expenditure and provide safe haven for portfolio investors, the report said.

Orbit added: "The Bank [BoT], secures increased funds to cover government's budgetary expenses while revenue sources for the government to fund various operations to curb spread of coronavirus.

"[Also BoT], provides a safe haven with sufficient return for public's funds as investment opportunities are starting to feel the impact of Covid-19," Investors' appetite on the most paying government paper, the 20 year Treasury bond, slowed down but the central bank accepted 45 per cent more than it offered last Wednesday.

BoT offered the usual 117bn/-and the public tendered 276.86bn/- from 440 bids.

"Successful amount [was] somewhat 45 per cent above the offer size," the report said.

The previous 20 years auction this February, with a similar offer, BoT had received 566 bids worth 450.87bn/-.

"During the previous auction, the Bank accepted 3.0 per cent less of the offer size from 208 bids," Orbit said.

The weighted average yield to maturity for 20 years government bond auctioned last mid-week lost 44.4bps to 15.8537per cent.

"Although the BoT had an opportunity to lower the yield further than it did, the bank opted not to, by accepting more than what the Bank offered," the report showed.