- State leaders in the East African Community (EAC) have announced 2012 for the year of a common currency in Tanzania, Rwanda, Burundi, Kenya and Uganda. But central bank leaders in the countries find they lack the tools to implement the monetary union.
An East African Monetary Union by 2012 was called for by the EAC heads of state and government during a recent summit. The common currency is to further foster economic integration in the regional trade block. A common market is to be established by 1 July this year, providing for free movement of goods, labour and services among the five East African countries.
But banking experts fear that the plans for a common currency by 2012 may be too ambitious as central banks in the five countries are given little time to prepare for the monetary union. Experience and knowledge is lacking in several of these central banks to implement the reform.
This week, representatives from the five EAC central banks are meeting in Kigali to discuss implementation of the union. Already at the start of the meeting, he bankers agreed on a "need for capacity-building in economic forecasting and modelling among staff in order for them to be prepared for the upcoming monetary union."
A report evaluating the capacities of each of the central banks found there were great needs for training programmes, especially regarding the key use of modelling and forecasting methods. Participants at the meeting "noted great gaps in their usage."
In his opening statement, Claver Gatete, Deputy Governor of the Rwanda National Bank, said that the importance of economic modelling and forecasting could not be underestimated. They are key instruments in monetary policy formulation as well as a way to provide a central bank with clear and efficient way to assess trends and developments in domestic and external economies.
"It is useful in monitoring where the economy stands and how to make short and long-term projections in order to determine what monetary policy to follow," Mr Gatete said. "There is a need for a Central Bank to have a clear understanding of its monetary transmission mechanisms," he added, asking for more training for EAC central banks.
The five East African central banks already in May 2009 had agreed to "develop capacity in economic modelling and forecasting" in all banks, ordering a report about the situation. This week's meeting, where the report is being presented, is to define training needs.
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