Tanzania is altering its foreign-exchange laws to allow non-residents to participate in government-securities auctions.
Until now, only Tanzanians abroad and nationals of the Southern African Development Community and the East African Community could invest in Tanzania’s domestic market.
“The reform aims to broaden access to the government-securities market and is part of the bank’s ongoing efforts to deepen the domestic financial markets and promote Tanzania as an attractive investment destination,” the Bank of Tanzania said in a notice.
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It is the latest reform measure for the nation that adopted a benchmark interest rate-based monetary policy framework at the start of 2024.
Governor Emmanuel Tutuba announced the publication of a Tanzania sovereign yield curve on Friday that he said was coming in a “timely manner following the 100% liberalisation of our capital market.”
The central bank will publish the yield curve daily to give investors a benchmark for pricing loans and corporate bonds.
“One of the expected benefits of this yield curve is that it will bring more foreign investors into our market,” Tutuba said.
The main attraction of local-currency bonds in frontier markets is the relatively high yields they offer, attracting strong bids from foreigners. Tanzania’s 20-year bond maturing in 2047 has a 12.56% coupon, while one with a 2051 maturity carries a 13.25% coupon.
In neighbouring Zambia, foreigners have piled into the local bond market after the government lifted in January a cap on non-resident participation in debt auctions.
Tanzania, which historically has depended on concessional loans from multilateral lenders for its budget, plans to borrow 3.27 trillion shillings ($1.24 billion) from domestic sources this fiscal year, nearly 11% higher than a year earlier.
Finance Minister Khamis Mussa Omar said last month that Tanzania could sell a Eurobond this year if market conditions allow. While he didn’t specify the size of the bond, one adviser to the Tanzanian government said the issue could raise as much as $500 million.
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