Hasten talks on single currency, EAC advised

The East African Community (EAC) partner states must speed up monetary union talks and conclude the negotiations by the end of this year.

The talks have dragged on since early last year, according to Dr Enos Bukuku, the deputy secretary-general in charge of planning and infrastructure, and the 2012 target for concluding the Monetary Union Protocol cannot be deferred.

“All the partner states delegates should do their utmost to build consensus quickly so that the negotiations are concluded in time,” he said in a speech read on his behalf by EAC’s Director for Planning, Mr Tharcisse Kadede, on Monday as the eighth round of the talks kicked off in Arusha. The talks started in January 2011.

“Use the latest round of negotiations to resolve outstanding issues and to move with greater speed to ensure an agreement is reached before the end of this year.”

The deputy secretary general asserted that the benefits of the Customs Union and the Common Market were too great to be trifled with and they were “more than ready” to embark on reducing the cost of doing business by attaining a monetary union.

He added: “I am, therefore, obliged to remind you that many East Africans within and beyond the region anxiously await  any insights from this meeting on what needs to be done right to make monetary integration work for the EAC.”

The six-day meeting has been convened to discuss outstanding matters from previous meetings of the High Level Task Force (HLTF) negotiating the draft protocol and also to deliberate on Articles 60 - 72,  which touch broadly on financial arrangements, integrated financial management system and transitional arrangements.

The draft articles up for discussion this week are particularly critical because they underpin the integration of the financial sector, which will be a key enabler of the monetary union.

The HLTF comprises senior officials from the partner states’ ministries of finance, planning and economic development and EAC affairs, as well as central banks, capital markets authorities, insurance and pensions regulatory agencies and national statistics offices.

Previous rounds of negotiations deliberated on provisions touching on the scope of the monetary union, the macroeconomic policy framework, monetary policy framework, exchange rate policy and exchange rate mechanism and instruments of monetary control. 

The negotiations started in January 2011.  The process for the establishment of the East African Monetary Union is underpinned by Articles 5 and 82 of the EAC Treaty which require the partner states to undertake to establish a monetary union and to co-operate in monetary and fiscal matters.

The primary rationale for a monetary union is to reduce the costs and risks of transacting business across the national boundaries of those countries which comprise the union.

By embracing a single currency, EAC partner states would remove the costs of having to transact in different currencies and the risk of adverse exchange rate movements for traders and travellers alike within the region.

 It is envisaged that the monetary union will deepen the integration of East African economies and enhance the benefits to be derived from the EAC Common Market.

To enrich the negotiations, the EAC commissioned various studies, which included a study on the review of the EAC macroeconomic convergence criteria and one on a harmonised monetary policy framework for the region, both done jointly by the EAC and the International Monetary Fund.

The draft final reports of both studies are due for review by the Sectoral Council on Finance and Economic Affairs (SCFEA) in September 2012 before they are forwarded to the HLTF.

Another study on a common exchange rate mechanism undertaken jointly with the International Growth Centre (IGC) has since been considered and adopted by the Sectoral Council on Finance and Economic Affairs and was forwarded to the HLTF as one of the inputs for the negotiation process.

The negotiating team, known as the High Level Task Force will, over the six-day period, discuss outstanding matters in Articles 1-59 of the draft EAMU Protocol and negotiate draft Articles 60-72.
Source: The Citizen,http://www.thecitizen.co.tz, reported by Zephania Ubwani
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