Dar es Salaam. The government has trashed Tanzania’s sovereign rating published last weekend by Moody’s, the renowned global credit and sovereignty rating agency.
The permanent secretary in the Ministry of Finance and Planning, Mr Dotto James, confirmed to The Citizen yesterday that the published rating was “premature” and had no government consent.
“It is true that we commissioned Moody’s agency for the work; but we were still in talks with them that were yet to be concluded,” Mr James said, stressing that “the report has been published without the government’s clearance, so, what is being circulated has no authority from our side”.
The rating report – a copy of which The Citizen has obtained – was circulating on social media over the weekend, after Moody’s had posted it on its website.
Mr James said the government was still continuing with internal consultations over the matter, and wondered why Moody’s had “prematurely” released the findings.
He also denied that the government had a meeting with Moody’s rating committee on February 27, this year, as indicated in the rating report.
What Moody’s had done was to come up with a rating report incorporating their own views, which seem to be unrealistic, Mr James said. Moody’s stated that Tanzania had been rated B1, "with a negative outlook”.
The rating indicates that Tanzania scored bettter than other East African countries such as Kenya, which was rated B2 on February 13 this year; Rwanda (August 12, 2016 rating) and Uganda (November 18, 2016 rating) were also accorded a B2 rating.
Tanzania has for many years been planning to formally rate its economy, with a view to floating a sovereign bond at the international financial markets.
The negative outlook by Moody’s indicates that the balance of risks to the country’s credit profile tilted on the downside due to an increasingly unpredictable policy environment weighing on the business climate.
“Uncertainty over the regulatory environment and policy stance of the government – particularly as it relates to the mining sector – could have a long-term negative impact on the country’s growth potential and ability to attract foreign investment,” Moody’s rating statement says.
Concurrent with the first-time rating assignment, Moody’s has said it assigned a ‘Ba2’ ceiling for local currency bonds and deposits, as well as a ‘Ba3’ foreign currency bond ceiling, and a ‘B2’ foreign currency deposit ceiling.
Moody’s assessment of Tanzania’s economic strength at ‘Moderate (-)’ balances Tanzania’s very strong growth potential, which has led to a rapid expansion of its economy, against its very low income levels.
However, the Moody’s rating projects Tanzania’s economic growth to remain at a similar rate over the medium term, driven by strong production in the natural resources sector – especially given the still untapped potential, as well as continued investment in large infrastructure projects.
Moreover, Moody’s says, “Tanzania’s economic competitiveness is constrained by a number of factors, as reflected in the relatively low ranking of 113th out of 137 in the 2017-18 World Economic Forum’s (WEF) Global Competitiveness Index.”
According to the latest edition of the WEF competitiveness report, the most problematic factors in doing business in Tanzania include access to finance, tax rates, and inadequate supply of requisite infrastructure.