Minister of State in Charge of East African Community (EAC) Manasseh Nshuti, has said that the EAC should ensure all the prerequisites for the monetary union attainment are available, citing inflation control, and the needed institutions. He was speaking on Thursday, November 03, in Kigali, during the East African Legislative Assembly (EALA) session that passed the Compliance and Enforcement Commission Bill, 2022. The Commission is one of the four institutions expected to carry out much of the preparatory work for the creation of the EAC Monetary Union by 2024. The other three institutions are the East African Monetary Institute (EAMI), the EAC Financial Services Commission; and the EAC Statistics Commission. According to the road map adopted by the Council for the Establishment of the EAC Monetary Union, this Commission was supposed to be established by 2018. “We need to have the prerequisites to the monetary union right. We cannot go either political, or otherwise. We need to have it right, and as such, the institutions that are precondition to this monetary union must be in place,” Nshuti observed. “We cannot afford the consequences of getting the monetary union wrong. And so, all these institutions must be in place,” he added. As per the Protocol, the objective of the Monetary Union shall be to promote and maintain monetary and financial stability aimed at facilitating economic integration to attain sustainable growth and development of the Community. Overall economic performance requirements Nshuti said that there are factors that EAC countries should converge on, including (controlling) inflation, “And when we are going this route, these are not either or no; we have to get them right. If we don’t converge, we cannot have a monetary union. We are going to have one currency; we know the benefits, but there are consequences if we cannot get it right,” he pointed out. Kennedy Ayason Mukulia, Chairperson of EALA’s Committee on Legal, Rules and Privileges on the East African Community Surveillance, said that “This Commission is one of the important commissions if we have to realise the monetary union,” he said. Talking about the at least 15 years of experience required for the Executive Secretary of the Commission, he said that he or she will be interacting with high-level persons that include ministers, diplomats from the World Bank, diplomats from the African Development Bank, from financial institutions such as the International Monetary Fund (IMF), and central banks, among others. “So, it requires some level of maturity and some level of experience in order for you to be able to lead this institution,” he said. Mukulia indicated that “this Commission is responsible for setting out the criteria for us to enter into the single currency area”, explaining that for that to happen, there is a need to meet the requirements set in article 6 of the EAC Monetary Union Protocol. This article provides that Partner States undertake to attain and maintain macroeconomic convergence. According to the Protocol, macroeconomic convergence shall be assessed on criteria including a ceiling on headline overall inflation of 8 per cent; a ceiling on fiscal deficit, including grants of 3 per cent of Gross Domestic Product (DGP); a ceiling on gross public debt of 50 per cent of GDP in Net Present Value terms; and a reserve cover of 4.5 months of imports. “And, the Committee also interacted in Dar es Salaam in the month of June [2022] and the report we got was that until that time, none of our Partner States meet those criteria to attain the single currency area,” he said, adding that it is that Commission that will also monitor the central banks when they will be reporting, and subsequently including the [EAC] Monetary Institute. Talking about the pre-requisites provided for by article 5 of the EAC monetary union protocol, MP Françoise Uwumukiza said that for the purpose of realising the monetary union, the Partner States should, among others, harmonise and coordinate their monetary and exchange rate policies. Another criterion is that countries should integrate their financial systems and adopt common principles and rules for the regulation and supervision of the financial system. “The East African Community payment and settlement systems integration project is ongoing. We need to hear from that project how far they have gone, because when I looked at their functions, they are supposed to finalise this integration of harmonising exchange rate policies, payments and settlements across the region this year, 2022,” she said.
