Tanzania Banks Wary of Slow Economy Bet on Government Bonds

Appetite for Tanzania’s sovereign bonds is expected to continue as banks in the East African nation prioritize lending to the government to secure some returns despite the Covid-19 pandemic, Bloomberg News reported. The nation’s last three bond sales were oversubscribed. The latest raised 182.3 billion shillings ($79 million) in 25-year bonds at 15.95%, attracting tenders of more than three times the amount offered, according to a Bank of Tanzania report on Wednesday. If the economy doesn’t recover from the pandemic quickly, banks will continue being reluctant to increase lending to businesses and households, said Ivan Tarimo, a partner at financial advisory firm Bankable Tanzania. They will continue to invest in “risk-free treasury bonds,” he said. The International Monetary Fund forecast Tanzania’s economy to expand 4% this year, compared with 7% before the pandemic in 2018 and in 2019. Growth in the second quarter slowed to 4.3% from 5% in the previous period, according to the nation’s statistics office. Read more.