EAC monetary union feasible in long-term
Posted Friday, March 22 2013 at 02:00
EAC experts argue that the current EAC treaty was silent on what they call salient issues, including matters of fiscal convergence, which are necessary for the dream of a monetary union to be achieved.
EAC experts are warning member states against rushing the endorsement of the Monetary Union Protocol, arguing that a number of things ought to be established first.
So far, a feasibility study on the establishment of a regional central bank is ready, a committee to oversee the implementation of the protocol is in place and a debt ceiling policy for each of the partners to ensure financial stability has been set.
Mr Paul Collier, a professor of economics and director at the Centre for the Study of African Economies at the University of Oxford, advised the EAC to first complete trade integration before implementing the monetary union.
“The region should, for example, first have a decade of independent national central banks with the same mandates of moderating inflation,” advised the economist, who has been attending a regional conference on the integration of the EAC financial sectors.
Prof. Sam Tulyanamuhika, a member of the committee of experts in charge of fast-tracking the EAC federation, supported Prof. Collier’s argument, saying countries with low inflation rates, such as Burundi and Rwanda, were likely to raise inflationary concerns in relation to Uganda’s oil discovery.
Regional bureaucrats and politicians argue that the Eurozone crisis should not be used to deter the process, but should be seen as a lesson to do things correctly.
Ms Maria Kiwanuka, the Finance minster, said EAC was monitoring the situation in the Eurozone closely to avoid mistakes they have made. “We are watching the Eurozone carefully to take note of the mistakes they have made and to ensure that we have mechanisms to prevent the same from happening to us,” she said at a recent meeting in Entebbe, Uganda.
Though policy-makers are optimistic that they would be ready for the single currency, experts are skeptical, calling for a cautious approach to avoid potential future crises. Henry Makmot, another member of the committee of EAC experts, said a monetary union was simply not feasible under the current EAC Treaty.