EAC moves closer to single currency
The document has now been referred to the Sectoral Council on Legal and Judicial Affairs, which meets in Bujumbura, Burundi, next week, for legal input, the EAC Secretariat announced here yesterday.
The Council of Ministers, during its extraordinary two-day meeting in Arusha early this week, also adopted the roadmap for the implementation of the Monetary Union Protocol. The details of the new roadmap, which will provide the time line for the signing of the protocol by EAC heads of state, could not be immediately known.
Some analysts have described adoption of the draft protocol as historic and a milestone. The draft protocol is a culmination of rigorous negotiations that started in January 2011.
The monetary union project is, however, behind schedule. The 11th extra-ordinary summit of EAC heads of state held in Arusha in April resolved that negotiations on the proposed East African Monetary Union (EAMU) should be concluded in August and the protocol signed in November ,this year.
But the new roadmap shows that this would not be possible.
“This (adoption of the draft protocol this week) is historical because it established the legal and institutional framework for the EAC to progress to the third pillar of integration which is the Monetary Union,” said the Chairperson of the Council of Ministers, Prof Tarsis Kabwegere, who is also Uganda’s Minister in Charge of General Duties in the Office of the Prime Minister. He said the EAC policy organ met in Arusha “to consider the outcome of the conclusion of the negotiations of the Monetary Union Protocol”.
EAC Secretary-General Richard Sezibera said the people of East Africa were resolute to embrace the monetary integration “having been energized by the benefits they had so far reaped from the implementation of the Customs Union and the Common Market”.
He pleaded to the policy makers as well as technocrats to help prioritize statistical and related issues which will, among others, “make our transit to the East African Monetary Union more seamless”.
He added: “Given the financial sector challenges in other parts of the world, some people in our region could be skeptical of the Monetary Union. It is, therefore, your expertise to reassure them and indeed the entire EAC that our Monetary Union is viable and we can all cope with the possible challenges ahead.”
Achieving the common monetary policy and, therefore, a common currency is a tall order, according to experts.
How quick the common currency comes into effect would depend on how the partner states resolved a range of issues to pave the way for the pact. one of these issues is the harmonisation and coordination of fiscal policies because an effective monetary union is the one that is supported by a common fiscal policy, experts argue.
Separate fiscal policies for a country in a single monetary union have been blamed for some of the major economic difficulties facing the Eurozone, and the EAC could face similar problems if the issue is not handled well.
A ministerial meeting which preceded the April summit observed that experts working on the monetary union have observed considerable challenges with harmonisation and coordination of taxation in the region.
“Partner states are at different levels of economic development and, therefore, need to provide for a provision for partner sates not to engage in harmful tax competition”, said the report seen by The Citizen.
Dr Sezibera yesterday saluted the technocrats for living to the expectations of the people of EA” especially at this economically difficult period in the region. He hailed the Council of Ministers for ushering the region into the long-awaited era of monetary union.
The newly-appointed EAC deputy secretary general (Political Federation) Mr. Charles Njoroge said the Sectoral Council on the Monetary Union had a defining role to play in determining the pace, quality and dept of the EAC monetary integration.
Senior officials from the five partner states; Tanzania, Uganda, Kenya, Burundi and Rwanda including the permanent secretaries, Solicitors General, Governors of the central banks and all chief executives as well as members of the High Level Task Force (HLTF) that spearheaded the talks were in attendance.
Other challenges to a quick EAMU include the scope of EAMU, institutions necessary for its proper functioning, the macroeconomic convergence criteria and management of foreign reserves.
And yet other challenges include the funding mechanism, transitional arrangements covering temporary and permanent institutions to be established during the transitional stage.
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