EAC states prepare for single currency
David Muwanga (Busiweek)- East African Community (EAC) member states are getting prepared for the establishment of a monetary union that is aimed at introducing a single currency across the five states. The monetary union is expected to be operational by 2012.
On 2 June 2009, the EAC and the European Central Bank (ECB) entered into a consultancy agreement in regard to the preparation of the study on the establishment of the East African Monetary Union (EAMU) among the partner states. The ECB did preliminary research on the study that was presented at a three-day workshop held in Kampala last week. The report followed preliminary findings from consultations in the partner states that were launched by the EAC Secretariat in September 2009.
Consultations that targeted a broad spectrum of stakeholders were held in all the five states and incorporated stakeholders’ views and a draft final report of the EAMU study was presented during the Kampala workshop. EAC deputy secretary general, Alloys Mutabingwa said that the output of the Kampala workshop would enable the consultants to finalise and submit the final report of the study on the establishment of the monetary union to the EAC’s monetary affairs committee by end of February 2010.
‘Basing on this report the committee will make recommendations to the sectoral council of ministers responsible for finance, investment, trade and industry which will consider the recommendations and make decisions on the way forward,’ Mutabingwa told journalists in Kampala.
The sectoral council is expected to convene ahead of the full council session scheduled for April 2010. ‘It is then that we shall have a report of findings on the way forward submitted to the next summit of heads of State to be held before June this year after they have consulted amongst themselves,’ he said. He added that the heads of State would then pronounce themselves on the monetary union.
Uganda’s minister of finance, planning and economic development Syda Bumba said the creation of a monetary union would put to an end the artificial separation of the people of East Africa, many of whom are of common descent and those who suffer traumatising exchange rate realignments in the region.
‘However the launch of the union would require detailed preparations and negotiations for the protocol for its establishment,’ she warned.
She said the introduction of a single currency would confirm the advent of a genuine culture of monetary stability in the EAC that is essential to establishment of stable and efficiently managed economic framework.
‘While the single currency will not erase the scourge of unemployment that is widespread in the region, the struggle for jobs will be deprived of a key driver,’ she noted.
She said the union would revitalise the region’s economy, foster investment, boost business competitiveness, benefit consumers and savers and make work and travel easier for citizens. ‘The task ahead is how quickly we can secure the protocol on its establishment and what should be the building blocks, roadmap and structure for negotiation,’ Bumba said.
‘We will have to reach consensus on macro economic convergence, fiscal policy, conduct of monetary and exchange rate policy, integration of financial markets, legal and institutional framework’s and loss of policy flexibility by partner states, freedom and monitoring and evaluation’, she said.