The High-Level TaskForce (HTLF) that was tasked to negotiate the protocol establishing the Monetary Union has called for the fast-tracking of the protocol after conclusion of the negotiations.
HLTF comprised senior officials from the partner states’ ministries of finance, planning and economic development, East African Community affairs, as well as central banks, Capital Markets Authorities, insurance and pensions regulatory agencies, and national statistics offices.
The High-Level Taskforce started its work in 2011.
It drew the conditions before the currency can start circulating on the regional market which include; harmonisation of fiscal policies, monetary policies, payment system, financial sector, as well as setting up the regional central bank that will regulate and control all the financial institutions across the bloc.
According to Dr Thomas Kigabo, Rwanda’s chief negotiator on an EAC Monetary Union, the taskforce submitted its draft protocol to the Sectoral Council of Ministers to include their input which in turn forwarded it to the legal and judicial experts.
The judicial experts were expected to fine-tune the draft at an ongoing meeting in Bujumbura, before the protocol can be signed by the Heads of State in their next Summit in November.
Kigabo said after approving the protocol is approved by Heads of State, the next phase will involve harmonising the policies to back up the establishment of single currency.
“If the Heads of State approve the protocol, it doesn’t mean that the currency will immediately take effect. Instead, we shall officially start implementing the protocol and the prerequisite conditions needed to put in place,” he said.
This means East Africans will have to wait a little while to start using the regional single currency as a lot needs to be done, especially in harmonisation of national policies that will facilitate the operation of the Community as a single market.
If the single currency is achieved it means all the national currencies among the five partner states will be phased out to pave way for the new note to function as regional transaction tool.
In their last summit in Arusha, Tanzania the regional presidents directed the Council of Ministers to expedite the conclusion of the protocol establishing the Monetary Union by November.
However, some experts say it might take more 10 years to implement the protocol which paves way for the introduction of the proposed currency.
Yet, as the common market protocol implementation continue the use of different currencies is considered among business communities as a trade barrier since it requires traders to exchange the money and sometimes cause losses due to various exchange rates among the partner states.
Eugene Muvunyi, an Economics lecturer at School of Finance and Banking, said there is a need to resolve all the challenges hindering the integration process.
“The single currency cannot be efficient if the problem of corruption that affects trade still exists. We have different economies and even in terms of fighting these challenges we are on different levels. There is need to address all these trade barriers to facilitate proper movement of goods and services,” Muvunyi said.
The common currency is seen as another stepping stone to strengthen the bloc population of 135 million people, and a GDP of $84.7 billion.
Experts have warned the EAC to move cautiously on single currency to avoid facing the same crisis like Euro zone that made member countries fail to finance their governments’ debts without the assistance of a third party.
The problem led to some financial institutions in Euro areas to face liquidation leading to slow economic growth.
EAC Heads of State had set a 2012 deadline for the envisaged Monetary Union but it has since been extending the negotiations.
After the implementation of the Customs Union and the Common Market, the Monetary Union is the next and third stage in the integration process of the EAC.
The ultimate step will be the formation of a political federation.