TANZANIA agreed $800 million of loans from
Rand Merchant Bank and China Development Bank Corp. to
bolster its foreign-exchange reserves, as the country shores
up a weakening currency, and plugs the budget deficit.
Talks with Johannesburg-based Rand Merchant Bank to
raise as much as $600 million and $200 million from China
Development Bank are being completed, said Joseph
Masawe, the Bank of Tanzania's head of economic
research and policy.
RMB will raise the money through a private placement, whil
CBD will finance the loan from its own balance sheet, he
said.
"We are expecting about $800 million and we think before
the end of this month we should be able to receive from
both banks," Masawe said in a phone interview Monday
from Dodoma, the capital. "We have finalised the details
and we are hoping this will improve the supply of foreign
currency."
Tanzania's shilling weakened 21% so far this year and is
Africa's worst-performing currency, after Ghana's cedi. Las
year, foreign donors including the World Bank and the U.K.
said they would withhold $558 million of budget aid becaus
of a corruption scandal in the energy industry.
The budget deficit is expected to widen to 4.2% of gross
domestic product this year from 4% last year, according to
Paarl, South Africa-based NKC African Economics.
The government is reducing its reliance on budget support
to 3% of total revenue in the fiscal year that begins on July,
from 7% in the current year, NKC said in an e-mailed
research note.
Tanzania's central bank sold $339 million to lenders from
January to April to support the shilling, it said on May 4. A
13% slump in gold shipments to $1.4 billion in the year
through to March and the government's "external
obligations" contributed to the shilling's decline, Masawe
said.
While the central bank says it has enough resources to
defend the currency, it has "scaled down sales" of foreign
currency to banks.
"About 65% of the currency depreciation is due to
strengthening of U.S. dollar and 35% is attributed to internal
factors and speculation by banks," Masawe said.
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