Uganda central bank says too early to talk about Eurobond

KAMPALA – Uganda’s central bank governor Emmanuel Tumusiime-Mutebile said on Friday it was too early to talk about issuing a debut Eurobond to fund infrastructure projects due to global market conditions.

Uganda, like some other African countries, has been mulling sovereign debt issues due to increased investor appetite in African frontier markets. Fellow African nations Ghana and Gabon issued Eurobonds in 2007 to good demand.Some emerging markets investors are looking again at the continent’s domestic debt markets following an outflow of money late last year due to the world financial crisis. ‘It is too early yet to reopen talk of going out into the markets either for the Eurobond or any other government borrowing,’ Tumusiime-Mutebile told reporters.’One (reason) is the condition in the markets and … we cannot afford to start borrowing under conditions that might bring back unsustainable levels of indebtedness.’On Wednesday, Fitch ratings agency upgraded Uganda’s outlook to positive from stable and reaffirmed its B rating. Last December, Standard & Poor’s gave Uganda a ‘B+’ credit rating with a stable outlook.Stephen Kaboyo, central bank director of financial markets, told Reuters in an interview on Friday that the Bank of Uganda was mulling issuing a ten-year treasury bond.Kaboyo said the central bank was ‘absolutely’ looking to issue more 5- and 7-year bonds. The central bank’s domestic debt strategy is a 40:60 ratio of treasury bills to bonds.The east African economy has been widely praised for its macroeconomic stability and steady growth rates over the past two decades. The finance ministry expects Uganda to grow six per cent in 2009/10 from seven per cent previously.The governor said he expects growth to rebound after this financial year to previous high levels. ‘After growing six per cent (this year), the economy will return to the medium growth trend of eight per cent per annum,’ he said.However, Tumusiime-Mutebile said a drop in inflation levels – initially expected to fall to single digits by the end of 2009 – could take longer due to regional food demand.Ugandan inflation has remained in double digits despite a fall in oil prices. Regional food demand has boosted its balance of payments, but kept pressure on inflation. The annual rate was at 11,6 per cent in July from 12,3 per cent previously.’The current episode of price rises for food may delay the return of inflation to single figures,’ he said. The governor did not say when he expected that decrease.- Nampa-Reuters