A municipal bond is a debt security that is issued by a local government entity commonly used to fund the construction of roads, schools, airports, hospitals, wastewater treatment facilities and other infrastructure projects.
The CMSA Public relation and Education manager Charles Shirima told The Guardian in an interview that the authority had already finalized the preparation of the guidelines for bonds issuance.
Shirima said the advantage of municipal bonds for investors is that they are tax-exempt, meaning that the returns from such bonds are not subjected to taxes, making it a highly attractive investment for individuals who are in a high tax bracket.
He said the CMSA’s five year-year National Development Plan III (FYDP) has identified issuance of thematic financial products, including green bonds as among alternative financing strategies, for supporting implementation of projects in the public sector
The manager called on municipal councils to submit their applications to the authority, after having completed all the required procedures.
According to him, municipal councils, local governments and water authorities in respective cities and municipalities are eligible to submit their applications.
“CMSA welcomes applications from all eligible applicants to submit their applications to the authority once they have completed their recommended procedures,” he said.
He said CMSA has taken some initiatives including engaging and training leaders in the President’s Office, Regional Administration and Local Government.
Municipal bonds can be thought of as loans that investors make to local governments, and they are used to fund public works such as parks, libraries, bridges and roads, and other infrastructure.
According to him, some UN agencies have shown interest in supporting municipal bonds, especially all those related to development infrastructure.
After issuing bonds, a legal separate entity will be formed to supervise revenues collected from the project in order to pay back the fund and the sustainability of the project.
On January 24 this year, Tanzania announced to partner with the European Union (EU) to develop a framework for issuance, regulation and supervision of green bonds in the country.
The Capital Market and Securities Authorities (CMSA) executive director Nicodemus Mukama said at the official opening of a three day workshop in Dar es Salaam, that the partnership marks an important milestone in the development of Tanzanians capital markets, financial sector and international cooperation with the EU.
Mukama said that the government needs for financing development projects have been increasing whereas sources of finance are limited.
“Issuance of green bonds is an important step in building sustainable financial markets, for sustainable economic development and growth adding that the partnership lays a strong foundation for taking the financial sector and the Tanzanian economy to higher heights,” he said.
“EU is partnering with CMSA to strengthen the capacity of capital markets in Tanzania focusing on decision making, supervision, and policy framework and regulator reforms,” said Cedric Merel, Head of Cooperation, European Union, delegation of Tanzania.
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