The East African Community (EAC)’s forthcoming East African Monetary Union (EAMU) should be geared towards averting debt crisis, similar to what has besieged the Euro zone.
Speaking to The New Times, the Minister in charge of EAC Affairs Monique Mukaruliza, said the partner states should avoid falling into financial crisis as they move towards the monetary union agreement by 2012.
She stated that the High Level Task Force (HLTF) negotiating the Protocol to establish the East African Monetary Union (EAMU) should ensure that the happenings in Europe do not transpire in the EAC.
The Eurozone crisis resulted from failure of the government of a sovereign state to pay back its debt in full.
From late 2009, fears of a sovereign debt crisis developed among fiscally conservative investors concerning some European states, with the situation becoming particularly tense in early 2010.
This included eurozone members Greece, Ireland, Spain and Portugal and also some EU countries outside the zone.
In the EU, especially in countries where sovereign debts have increased sharply due to bank bailouts, a crisis of confidence has emerged with the widening of bond yield spreads and risk insurance on credit default swaps between these countries and other EU members, most importantly Germany.
“There is a need to find the sort of controls or regulations that will prevent a similar situation from taking place here.” Mukaruliza said.
The Minister disclosed that the HLTF has, so far, concluded four rounds of negotiations. They are supposed to complete their consultations by April next year.
“Forming a common currency assumes a high state of such union where EAC bloc’s fiscal and monetary policy be tightly controlled to avoid debt crisis,” she noted.
The HLTF is currently negotiating the requirements to be fulfilled by the partner countries before signing and implementing the EAMU next year.
The Minister of EAC Affairs said that Rwanda’s position is to enter into the monetary union well prepared and after meeting all the requirements.
The needs include the country’s level of macroeconomic convergence criteria, managing external debt aid and inflation rates among others.