Following the implementation of a fully fledged East African Customs Union and the signing of the region’s Common Market Protocol, the East African Community (EAC) Secretariat has reiterated commitment to establish the Monetary Union
The EAC secretariat said in a statement that they will, this week, hold a three day validation workshop on the Monetary Union—the 3rd pillar of the region’s integration process.
This follows a directive from the EAC five Heads of State that the Monetary Union should be in place by 2012.
The workshop, which is scheduled for January 18 - 20, will deliberate on a final draft report from preliminary study findings on the establishment of a monetary union.
The interim draft report was submitted by consultants from the European Central bank (ECB). It is also a result of a series of consultations in the Partner States since September 2009
Consultations targeting a broad spectrum of stakeholders were held in all the five Partner States and the consultants incorporated stakeholders’ views leading to the final draft report of the EAC Monetary Union Study, which the Kampala workshop is expected to discuss.
A statement by the Secretariat said that the output of the workshop will enable the Consultants to finalize and submit the final report of the Study on the establishment of the Monetary Union at the end of February 2010.
The report is expected to provide a conclusive roadmap on the establishment of a single currency in the region.
“The most important finding from this study is that a lot of work needs to be done before we make a decision on a common currency. There is also need for the monetary union protocol,” François Kanimba, Governor of the National Bank of Rwanda (NBR) told Business Times.
He said there is need for a strategic framework to iron out the issue of macroeconomic convergence among the five partner states.
“This is a priority because currently EAC countries have a divergence in macroeconomic indicators. It may take years but it requires a lot of commitment from partner states,” Kanimba said.
The strategic framework will provide a mechanism for monitoring and coordinating Partner States’ economic policies to promote convergence, experts say.
The five Central Banks will also have to agree on a common monetary policy that will serve to ensure that the unified regional currency will be stable in order to foster further economic and financial integration among Partner States.
The EAC Secretariat said the Kampala workshop will mainly brainstorm on the prerequisites for the establishment of the EAC Monetary Union; on the legal, regulatory and institutional framework.
The workshop will also receive progress report of the International Monetary Fund (IMF) Project on Regional Financial Sector for EAC Partner States.
“The scope and focus of the project is to assess regional frameworks for financial stability, analyze cross border and policy challenges. It will also evaluate the harmonization of the institutional and regulatory financial infrastructures in the region” said Alloys Mutabingwa, the EAC Deputy Secretary General (Planning & Infrastructure), said in the statement.
Article 5 of the EAC Treaty states that: “EAC Partner States shall undertake to establish among themselves a Customs Union, a Common Market, subsequently a Monetary Union, and ultimately a Political Federation.
In addition, Article 82 of this Treaty calls on the EAC Partner States to cooperate in monetary and financial matters and maintain the convertibility of their currencies as a basis for the establishment of the Monetary Union.
The Kampala workshop will be attended by senior officials from the Partner States’, Ministries of Finance, EAC affairs, planning, Trade and Industry; central banks, Bureau of Statistics.
It will also attract the region’s capital markets authorities, association of bankers the academia, parliamentarians; the private sector and the civil society.