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| EAC member states currencies |
Contrary to earlier projections,
the East African Community (EAC) will have to wait much longer before it
establishes a single currency.
The revelation was made in Arusha this week by the bloc’s secretary
general, ambassador Richard Sezibera.
Speaking on the sidelines of the conference themed “EAC after 10
Years”, Ambassador Sezibera said the only significant achievement that the EAC will record this year would be the
signing of the Monetary Union Protocol.
The monetary union would set the tone for channels through which a
single currency could be formulated. In
2007, EAC heads of state instructed the
East African Community Monetary Committee Affairs to fast track the Monetary Union, as one of
the major steps towards attaining the
regional single currency goal.
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| Dr Sezibera |
The committee comprises governors of
the central banks of the five
member states – Kenya, Uganda, Tanzania, Rwanda and Burundi.
However, Ambassador Sezibera said apart from the ongoing negotiations
of the monetary union protocol, not much has been discussed on the establishment of a single currency.
He said partner states are currently preparing the region to harmonise
its monetary systems and exchange policies, payment and settlement system,
statistics and regionalisation so as to have a harmonised single financial
market.
The EAC has since its establishment in 1999 taken significant steps in
implementing its mandate. The most significant achievement has been the
negotiation of the EAC Customs Union Protocol, which was signed in March 2004,
and began operating in January 2005.
The customs union has strengthened the position of the EAC as an
economic centre of gravity, with important implications for many types of
stakeholders, including foreign investors.
After the establishment of the common market in October 2010, the next
stage of the EAC integration project would have been formation of the monetary
union this year, which then would usher in the most ambitious part, the
political federation.
Despite the progress that has been made so far in the integration
process, experts have been expressing misgivings over the pace it was taking
and the set timelines for establishing the various protocols. Major concerns
have been over the single currency plan and attainment of the political
federation by 2015.
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| Dr Ngowi |
According to economist Honest Ngowi of Mzumbe University, the target
date for the monetary union was too ambitious and highly unrealistic given the
situation on the ground.
He says there are too many pieces and bits that have to fall in place
in the complicated jig-saw puzzle before a meaningful monetary union can be
realised as macro-economic convergences.
Addressing the EAC conference, economist Paul Collier of Oxford
University advised the bloc’s member states to take time to study all the
intricacies involved in setting up a monetary union.
He said doing that was important in order to avoid any future crisis
that might arise, citing the ongoing Euro Zone currency difficulties as a case
in point.
“It’s not the right time for EAC
to have a single currency. You need a lot of time; it’s not good to rush. There
is a need to learn more, especially what would be the incentives among the
partner states and the penalties for discipline to those who will not fulfill
their obligations,” Prof Collier noted.
A World Bank financial sector and private development advisor for the
African region, Mr Michael Fuchs, said the EAC should first focus on other
issues, like developing infrastructure, instead of wasting time on a monetary
union that will not deliver development to the region.
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