Greece contagion reaches East Africa

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Tanzania – Tanzania’s central bank shelved plans to raise $600 million through a private placement managed by Rand Merchant Bank of South Africa, citing fallout from the Greek debt crisis.

“We have postponed,” Joseph Masawe, head of economic research and policy at the Bank of Tanzania, said in a telephone interview from Dar es Salaam, Tanzania’s commercial capital, on Wednesday. “Because of the Greece default, conditions attached to the loan are going to be more stringent. We are waiting for when market conditions are better.”

Rand Merchant Bank referred questions to First National Bank Tanzania. Both are units of FirstRand, the Johannesburg-based lender. FNB Tanzania CEO Dave Aitken declined to comment, citing a non-disclosure agreement.

The central bank said last month it agreed to raise $800 million of loans from Rand Merchant and China Development Bank Corp. to bolster its foreign-exchange reserves and plug a budget deficit. The Tanzanian shilling weakened 22 percent against the dollar this year and is Africa’s worst-performing currency in that period, according to data compiled by Bloomberg.

The government received $200 million from China Development Bank, in addition to $100 million from the World Bank and $77 million from African Development Bank, Masawe said. The loans will be used to support the budget and boost foreign-currency reserves, he said.

Corruption Scandal

Tanzania is raising money for its budget after foreign donors, including the World Bank and the UK, withheld $558 million of aid because of a corruption scandal in the energy ministry.

The budget deficit of East Africa’s largest economy after Kenya will widen to 4.2 percent of gross domestic product this year from 4 percent last year, Finance Minister Saada Mkuya said last month.

The central bank spent $410 million between January and May trying to stabilize the Tanzanian shilling, Masawe said. The currency strengthened 1.1 percent to 2 220.40 per dollar by 8:33 a.m. in Dar es Salaam on Thursday.


REUTERSFile photo.

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