MAENDELEO YA KIWANDA CHA SUKARI KAGERA

ANGALAU HABARI HII INATUPA MATUMAINI KATIKA HALI HII YA KUTISHA YA KUDORORA KWA UCHUMI 2008/2009



Positive the company will eventually service troublesome loan

THISDAY REPORTER
Dar es Salaam

THE government faces a massive liability of close to 60bn/- as a result of its controversial guarantee of a loan issued to the privately-owned Kagera Sugar Limited by several local commercial banks and pensions funds back in 2004, it has been confirmed.

However, Bank of Tanzania Governor Prof. Benno Ndulu has told THISDAY that there is still a general optimism amongst concerned parties that the troubled sugar manufacturer will see a change of fortunes this year, and subsequently service the troublesome loan.

’’The parties (believe) that Kagera Sugar is a good project capable of bringing about the expected economic benefits. In view of the agreed restructuring plan and the fact that Kagera Sugar is currently in full production, the government is positive that the company will be able to service the loan in accordance with the debt service schedule,’’ Prof. Ndulu said.

The government, through the central bank, initially issued a guarantee to a syndicate of lenders covering 80 per cent of an initial 65bn/- loan granted to Kagera Sugar Ltd (KSL) in June 2004.

This loan amount was later increased in April 2005 to a whopping 74.8bn/- to finance further rehabilitation and expansion of the company’s sugar-making plant, as well as to cover operating and other administrative and marketing expenses.

’’Accordingly, the (BoT) guarantee cover was also enhanced to 80 per cent of 74.8bn/-,’’ Prof. Ndulu explained in response to questions sent by THISDAY.

According to the central bank governor, the total government liability on the loan based on the guarantee agreement is 80 per cent of the principal loan, which amounts to approximately 60bn/-.

He said the decision to support the project by issuing the guarantee was based on various economic benefits that could accrue to the economy, including tax revenue, creation of employment, formation of downstream business opportunities, and generation of foreign currency through exports to neighbouring countries.