Tanzania local authorities face significant challenges to address critical urban infrastructure and services due to lack of funding. Currently the dependency of fiscal transfers from the central government is approximately 90% of their budgets. Therefore, adopting Municipal bonds as one of the new sources of funding will help local authorities to increase ability to access sustainable sources of capital financing by mobilizing public and private capital investment, while transitioning their finances from traditional pure grant funding to a broadened mix of financial sources, to be able to address their local challenges. In addition, it will strengthen the Tanzania financial markets and market intermediaries so that they can facilitate capital access for local governments.
The three days event attracted over 85 senior officials from government, public and private sector including Ministry of local government, Ministry of finance and Planning, Treasury Registrar Office, Ministry of Water, the Zanzibar Ministry of Local government, Capital Market & Securities Authority (CMSA), Central Bank of Tanzania (BOT), Dar es Salaam stock exchange (DSE), regional secretariats, local governments, and sub-national water authorities. In addition, key capital market actors such as brokers-dealers, banks, and financial advisory firms were involved.
In his opening remarks, the Arusha Regional Commissioner, H. E John Mongela, on behalf of the Minister of State – President’s Office Regional Administration and Local Governments said that “Cities, municipalities and water authorities that are financially strong are encouraged to pursue municipal revenue bonds as a source of finance for income generating development projects. This will provide a relief to the central government and focus the use its development grants more towards social services. We welcome UNCDF and its national municipal bond task force partners for supporting government’s efforts in the implementation of the Financial Sector Development Master Plan 2020/21 – 2029/2030, of which municipal bond is considered as one of the financing options for national development”.
UNCDF is working together with the Ministries of Finance and Local Governments to jump start the use of untapped alternative financing mechanisms to help the Government of Tanzania meet its objectives as articulated in the 3rd phase of the Five-Year Development Plan (FYDPIII) and the need to broaden domestic revenue base to fund development needs.
Speaking at the event, The Head of UNCDF in Tanzania Mr. Peter Malika said “the use of municipal revenue bonds as a local financing instrument and the incorporation of green/climate resilient elements e.g., in its water infrastructure e.g. is a game changer in the Government financing mix towards development initiatives” He said “We recognize the mismatch between national budgets, rapid urbanization and increased demand for critical services such as water, transport, waste management, health, education, etc. putting more pressure to cities, municipalities, and emerging secondary cities’ ability to serve the people”
The event comprised of 1) training session for the first batch of potential local authorities such as Dodoma, Dar es Salaam, Arusha, Mbeya, Mwanza, Tanga, etc. with ready capacities to engage in the bond issuance process; 2) a symposium for capital market actors; 3) a strategic national municipal bonds task force meeting overseen and fast-tracking implementation. It is one of many capacity building series conducted by UNCDF, and others at different levels and different stakeholders will follow soon.
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