International Monetary Fund has warned Uganda against hurrying to sale of Eurobonds before it gets the potential to invest the money effectively.
Uganda plans to sell its first dollar-denominated Eurobond in the next two to three years to finance “massive” projects, Keith Muhakanizi, the deputy treasury secretary, said on May 29.
IMF boss Thomas Richardson says interest rates on the borrowed funds would be a great burden to Uganda if the money was spent ineffectively.
“The government should also avoid the temptation of borrowing from the national pension fund at lower than market rates,” Richardson said
Eurobonds are attractive financing tools as they give issuers the flexibility to choose the country in which to offer their bond according to the country’s regulatory constraints.
They may also denominate their eurobond in their preferred currency. Eurobonds are attractive to investors as they have small par values and high liquidity.