Greek debt crisis affects East Africa-BoT

Greek debt crisis has contagiously affected economies of East Africa, including Tanzania forcing it to shelve its plan to raise US $600 million through a private placement managed by the Rand Merchant Bank of South Africa.

The Bank of Tanzania (BoT) Governor, Prof Benno Ndulu, said in an interview in Dar es
Salaam that investors around the world were

worried about the outcome of the Greek debt crisis.

Last month, BoT agreed to raise 800 million US dollars of loans from Rand Merchant and China Development Bank Corp to bolster its foreign-exchange reserves and plug a budget deficit which is expected to widen to 4.2 per cent of GDP this year from 4 per cent last year.

“The Greek eurozone crisis has pushed up the cost of lending, thus making it inappropriate period to raise money from international lenders,” he said, adding that the situation has not hit Tanzania alone but all countries in the world.

The euro dropped to a fiveweek low against a buoyant US dollar on Tuesday, after the European Central Bank tightened lending conditions for Greek banks, raising concerns the lenders could run out of cash.

Against the dollar, the euro fell 0.7 per cent to 1.0978 US dollar, after sliding to a five-week low of 1.0917 US dollar, while the dollar index rose 0.6 per cent to 96.846, after earlier hitting a one-month high.

According to Prof Ndulu, the Greek crisis is raising the state of uncertainties among lenders that could lead to liquidity tightness, to push the cost of lending.

Prof Ndulu said there is no need to rush to such expensive loans as the government has received 200 million US dollars from China Development Bank, in addition to 100 million US dollars from the World Bank and 77 million US dollars from African Development Bank.

He said the funds received will currently be enough to bolster foreign-exchange reserves and plug a budget deficit. “Greek eurozone crisis has made the conditions attached to the loan more stringent. Therefore, we are waiting for when market conditions are better.”