The government has identified a consultant to assist in the preparation of the legal and institutional framework for issuance of the long awaited municipal bonds.

Speaking in an interview with this paper, Capital Markets and Securities Authority (CMSA) chief executive officer Nasama Massinda, said the consultant will commence assignment shortly after negotiations on the contract between him and the government have been finalised.

She said in an endeavour to promote and develop efficient and sustainable capital markets and securities in Tanzania, the CMSA conducted a feasibility study on municipal bonds market in 2005.

The study, she said, observed that there are sizeable local authorities prepared to raise funds by way of debt instruments,, adding that the development financing to the local authorities remains inadequate and that there is a competent regulatory regime for the instruments.

It was however, noted that the prevailing government policy would not support efficient issuing of bonds by Local Government Authorities (LGAs) for public subscription.

The government through the assistance of the World Bank sponsored the two-phase municipal bonds study.

According to her, 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, she said, pursued to develop the legal and operational framework for the municipal bonds markets in the country.

In March 2009 the consultant was recruited to perform the first part of the municipal bonds study the main objective of the study being to review the current and recommend a future appropriate legal, institutional and policy framework to establish viable municipal bond markets.

The consultant submitted the final draft report and the same were reviewed by CMSA. A number of improvements were made and a stakeholder’s workshop was conducted to discuss and provide further comments. And the conclusion was that it is viable to issue municipal bonds in Tanzania.

CMSA initiated and supported the move to allow municipalities to raise funds from the public for their development projects through issuance of bonds.

The Dar es Salaam Municipal Director, Bakari Kingobi, was recently quoted as saying that the municipalities qualify for loans and are loanable.

"Although we have not received official notification from the Bank of Tanzania (BoT) on the move, it is an important step that will help the city to raise funds for the implementation of its own projects," he said.

The director gave the example of Machinga Complex, that was financed by the National Social Security Fund (NSSF), which he said has shown positive results.

The bonds, according to experts, will help raise resources for development of schools, airports, hospitals and other facilities, he said.

At present all local authorities depend largely on subventions from the central government and some taxation to raise revenues for their expenditures.