The Capital Market and Securities Authorities (CMSA) have given local government authorities the green light to issue municipal bonds on the Dar es Salaam Stock Exchange (DSE) to finance development projects. Municipal bonds are debt securities issued by local governments, typically used to fund infrastructure projects such as roads, schools, airports, hospitals, and wastewater treatment facilities.
In an interview with The Guardian, CMSA Public Relations and Education Manager Charles Shirima revealed that the authority had completed preparing guidelines for bond issuance. He highlighted the tax-exempt status of municipal bonds, making them an attractive investment for individuals in high tax brackets.
Shirima explained that the CMSA's five-year National Development Plan III (FYDP) includes issuing thematic financial products like green bonds as alternative financing strategies for public sector projects. He encouraged municipal councils to submit their applications to the authority after completing necessary procedures. Eligible applicants include municipal councils, local governments, and water authorities in various cities and municipalities.
The CMSA has taken several initiatives, such as engaging and training leaders in the President's Office, Regional Administration, and Local Government. Municipal bonds are essentially loans that investors provide to local governments for funding public works and infrastructure projects. According to Shirima, some United Nations agencies have expressed interest in supporting municipal bonds, especially those related to development infrastructure.
After bonds are issued, a separate legal entity will be established to oversee the revenue generated from the project to ensure repayment and project sustainability. On January 24, Tanzania announced a partnership with the European Union (EU) to develop a framework for issuing, regulating, and supervising green bonds in the country.
Nicodemus Mukama, the CMSA Executive Director, stated during a three-day workshop in Dar es Salaam that the partnership signifies a crucial milestone in Tanzania's capital markets, financial sector, and international cooperation with the EU. Mukama emphasized the importance of green bonds in creating sustainable financial markets and promoting economic development and growth. The partnership will also focus on strengthening the capacity of Tanzania's capital markets in decision-making, supervision, policy framework, and regulatory reforms, according to Cedric Merel, Head of Cooperation at the European Union delegation in Tanzania.