RE: “Why EAC needs a regional currency” (The New Times, September 13). Look at the straitjacket that is the euro for the mostly southernmost (with Ireland as the exception) member states of the EU (the so-called PIIGS - i.e. Portugal, Ireland, Italy, Greece and Spain) and be extremely wary of single currency systems involving countries at different levels of economic development, and which deprive the individual members of their ability to use currency valuation as an instrument of monetary and economic policy adjustment.
Until our economies are better aligned, we must device alternatives to a single currency to reduce transaction costs of having to use the dollar intra-EAC trade.
The East African Community (EAC) does not need a common currency like the euro at this time. This would require multiple financial and economical adjustments which we are not ready for now. What is needed is a stable and sustainable means of payment across multiple borders.
A common currency for EAC does not need to be a real currency at all — as long as it can facilitate transaction and reconciliation of accounts.
A very good model for this payment mechanism is the special drawing rights (SDR) as used by the IMF. We could do something similar but tied to the relative value of the national currencies of the EAC partner states. The exchange rate could be revised weekly if necessary.
In my opinion, this solution bypasses outside influence on our internal commerce and is sustainable. It does not require any political or currency change. It is a cheap solution for a big problem.