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CMSA: Only Three municipal councils qualify to issue bonds

28th January 2013
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Capital Markets and Securities Authority (CMSA)

Municipal bonds are soon to be a reality in three councils according to a study carried out countrywide by the Capital Markets and Securities Authority (CMSA), which also established that poor governance in the rest is the major hindrance for them to undertake the venture.

Nasama Massinda, CMSA Chief Executive Officer made the long awaited announcement last week in Dar es Salaam during a tour to the agency’s offices by the Parliamentary Committee on Public Organisations Accounts (POAC).
 
She clarified that bonds are a viable supplementary revenue source for the municipalities since, according to her, most cannot raise money through the stock exchange. She however did not specify what prevents them from doing so.  
 
“…our feasibility studies across most municipalities in the country have revealed that many of them need to improve their financial status…,” she revealed and conceded that dire lack of good governance was the cause.
 
Given that unfortunate reality, Massinda, reported that only three municipalities stand the chance to raise money through the stock market and these are in Mbeya, Arusha and Dar es Salaam. 
 
Last year the government identified a consultant to assist in the preparation of the legal and institutional framework for municipal bonds. 
The consultant was expected to commence assignment shortly after negotiations on the contract between him and the government have been finalised.
 
The government through the assistance of the World Bank sponsored the two-phase municipal bonds study. The study brought to light the fact that, the prevailing government policy would not support efficient issuing of bonds by Local Government Authorities (LGAs) for public subscription.
 
The first phase of the project strived to establish the feasibility and required policy changes for a thriving municipal bonds market in Tanzania. 
The second pursued to develop the legal and operational framework for the municipal bond markets in the country.
 
CMSA initiated and supported the move to allow municipalities raise funds from the general public for their development projects through issuance of bonds.
The Dar es Salaam City Council director, Bakari Kingobi, was recently quoted as saying that the municipalities now qualify to issue loans.
 
"Although we have not received the official go ahead from the Bank of Tanzania (BoT)… the signs are promising…" he said and his optimism is in order for according to experts, will help raise resources for development of schools, airports, hospitals and other facilities.
 
At present all local authorities depend largely on subventions from the central government and taxation to raise revenue for their expenditures.
SOURCE: THE GUARDIAN