East Africa |
Economy - Development
Hurry to implement East African single currency
afrol News, 17 January - The five states making up the East African Community (EAC) are in a hurry to prepare for their common currency, which according to plans is to be introduced already next year. Experts now see how they can fast-track the process.
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Experts from the five EAC states today embarked on a four-day meeting in Arusha, Tanzania, that sets the stage for negotiations for the East African Monetary Union. The so-called "High Level Task Force" to see the monetary reform through is in a hurry.
A single currency was part of the EAC foundation treaty as defined by the three founding nation of the union, Kenya, Tanzania and Uganda. But little was done to achieve the goal until an EAC summit in 2007 decided to fast-track the single currency. The monetary union was to be implemented by 2012, the leaders then decided.
But since 2007, the process has gone slower than expected, with much focus being on the successful introduction of a common East African market. The process has further been slowed down and complicated by the admission of two new nation to the EAC; Rwanda and Burundi.
According to the EAC, the original plan of introducing the common currency already next year is still operative, as confirmed in an EAC statement released today. Regional media, however, operate with 2015 as a more realistic date to implement the monetary union throughout East Africa.
The expert group currently gathered in Arusha further gave the impression of not having come far in the process. The message from EAC Secretary General Juma Mwapachu was rather of explaining why the monetary union was important for regional integration and growth, rather than presenting detailed plans of how to implement it.
"The introduction of a common currency will provide a stronger and more solid basis for investment and economic growth," Mr Mwapachu remarked, adding, "Certainly, for an efficient and effective common market to operate, a monetary union, and not simply the free movement of capital, is essential." He further emphasised on regional integration and price stability as major gains from a unity currency.
During this week's meeting in Arusha, the expert group is expected to "consider and adopt the methodology of work, review and refine the draft roadmap towards the East African Monetary Union, and lastly agree on the calendar of activities for the negotiations process."
Negotiations for the detailed agreement that defines the monetary union are only slated to commence in March this year. Only after that, works on the introduction of the common currency can begin, including the planned establishment of the East African Central Bank (EACB) and East African Monetary Institute (EAMI).
While the East African monetary union is in a hurry to meet deadlines, the EAC so far has made a thorough work to make sure the project is viable and how a monetary union can best be organised. Only recently, a major study commissioned from the European Central Bank (ECB) was presented, further developing the EAC model for a monetary union.
The EAC is determined to introduce the common currency, hopefully during next year. Advices from the ECB and the International Monetary Fund (IMF) - both having promised wide-ranging support for the project - however say 2015 is a more realistic date.
The monetary union will be a third pillar in the steadily deepening EAC union, following a customs union and a single market. The EAC is seen as a promising regional union, much more flexible and quicker to implement integration than for example Southern Africa's SADC. SADC is far from achieving a customs union or a monetary union.
East Africa is also a fast growing region, both when it comes to the block's population and its economy. The EAC region could develop into a major economic block in some decades if current trends continue.
By staff writers
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