EAC Launches Consultations on the Monetary Union

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The East African Community Secretariat is launching a series of consultations in the Partner States from 7 to 25 September 2009 on the establishment of the East African Monetary Union (EAMU). The Deputy Secretary General of the East African Community in charge of Planning and Infrastructure, Mr. Alloyce Mutabingwa, two consultants from European Central Bank (Mr. Erwin Nierop and Mr. Scheller Hans Peter), the EAC Principal Economist (Fiscal and Monetary), Mr. Tharcisse Kadede and other senior EAC officials will spearhead the consultations in the Partner States together with the Central Banks.

The consultations will target a broad spectrum of stakeholders and to include among others; the National Central Banks (NCBs); Ministries of Finance, EAC Affairs, Planning, Trade, Industry; Capital Markets Authorities; Bureaus of Statistics; Bankers Associations; Academia; Parliamentarians; the Private Sector and the Civil Society.

The consultations kick off in the United Republic of Tanzania from 7 to 8 September in Dar es Salaam at the Central Bank (Bank of Tanzania) and at the Blue Pearl Hotel; in the Republic of Kenya from 10 to 11 September in Nairobi at the Central Bank of Kenya and at the Kenya International Conference Centre; in the Republic of Uganda from 14-15 September at the Bank of Uganda and at the Imperial Royale Hotel; in the Republic of Rwanda from 17 to 18 September at the National Bank of Rwanda and at the Kigali Serena Hotel; in the Republic of Burundi from 21 to 22 September at the Source Du Nil Hotel; and finally in Arusha, Tanzania from 24 to 25 September 2009.

The EAC Secretariat in collaboration with European Central Bank (ECB) is undertaking a comprehensive study on the proposed EAC monetary Union. Consultation meetings in the five Partner States (including at the EAC Headquarters) are mainly geared at discussing the preliminary findings of the ongoing Monetary Union Study and to finalize the assessment of the preparedness of the EAC Partner States for the Monetary Union.

On 2 June 2009, the East African Community and the European Central Bank (ECB) entered into a consultancy agreement with regard to the preparation of the Study on the establishment of East African Monetary Union (EAMU) among the Partner States of the East African Community (EAC).

During the consultations, various stakeholders in the process towards Monetary Union will be acquainted with those issues which are likely to arise in this process. The stakeholders will be introduced to the scope of the Study to be finalized and submitted by the ECB to the EAC in January 2010. Stakeholders will also be taken through the prerequisites for East African Monetary Union; the establishment of the legal and institutional framework necessary for the implementation of East African Monetary Union; the preparatory work for the move to East African Monetary Union inclusive of the measures to be taken in replacing the national currencies with the future single currency; and the operational regulatory framework for East African Monetary Union. The stakeholders are expected to actively contribute to the discussions on the establishment of the East African Monetary Union.

Following the establishment of the EAC Customs Union in 2005, and the ongoing finalization of the negotiations of the establishment of the East African Common Market in January 2010, the next most important stage in the East African integration process is the Monetary Union. The EAC Heads of State have directed that the East African Monetary Union be in place by 2012. The final report of the Study on the establishment of the Monetary Union to be submitted to the EAC Secretariat in January 2010 will provide a conclusive roadmap on the establishment of a single currency in the region.

 

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The East African Monetary Union (EAMU) has all the makings that it will be patterned on the Euro monetary union by 2012 when it will be introduced.

This was revealed in Dar es Salaam during discussions among the East African Community Secretariat, the European Central Bank (ECB) and Tanzania's strategic collaborators.

The EAC, which is conducting two-week consultations in all five member states on the establishment of the EAC Monetary Union (EAMU), said the preliminary study has been completed and a team of the European Central Bank that prepared the study is currently taking opinions of stakeholders before it submits its final report to the EAC Secretariat in Arusha in January 2010.

The meeting, the first of six scheduled meetings, took place in Dar es Salaam on September 7-8, and was followed by another one in Nairobi, Kenya on September 10-11, before moving to Kampala, Uganda on September 14-15. The ECB/EAC study team will then hold other meetings in Kigali, Rwanda on September 17-18, and Bujumbura on September 21-22, before they return to EAC Secretariat headquarters in Arusha for September 24-25, 2009 discussions.

The EAC said the consultancy being conducted by the ECB consultants will mark the culmination of third phase implementation of the EAC Treaty whose first two stages recorded positive objectives: the customs union is in place and the common market will come into effect in January 2010. The last phase will be an East African political federation.

The discussions in Dar es Salaam involved the Bank of Tanzania, the Treasury, the Planning Commission, the Bureau of Statistics, the Bankers Association, academia, the private sector and other stakeholders.

According to the ECB, the discussion paper they have prepared is intended to stimulate reflection and discussion between the various stakeholders and the ECB and EAC, but cautioned that the observations contained in their discussion paper were merely tentative and do not prejudice the final outcome of the study. The ECB paper draws a lot of experience from the 27-nation European Union.

The ECB was been contracted to take stock of current preparedness, take proposals, to design a model for protocol negotiations, to propose for the monetary institute and propose a monetary criteria.

In the discussions, the ECB team emphasized on the importance of abiding by the monetary union protocol, the legal framework that will stipulate operations, the monetary law, judicial review and accountability of the institution and its staff.

"To function smoothly and to bring about economic benefits for all EAC partner states, EAMU should therefore start with a high degree of sustainable monetary and economic convergence and compatibility among the partner states," the ECB team stressed.

"To reap benefits from a single currency, EAC partners should enjoy a good measure of economic integration (trade and financial flows and cross border movements of people and enterprises).

Integration of financial markets is indeed necessary for monetary policy to work across the whole area," the ECB study says.

Source:

Sept 14, 2009