Why the East African Monetary Union goal needs political support
- A unified monetary system with a single currency necessitates a transformation of the region's current governance structure, which would be difficult to achieve without a political federation
Arusha. The road to an East African single currency is patchy as it is due to the complex nature of the procedures that guide its attainment.
But one impediment, the sovereignty of member countries, risks derailing the process towards the East African Monetary Union (Eamu) project altogether, according to the former EAC deputy Secretary General Enos Bukuku. EAMU is a precondition for the creation of the single currency
Dr Bukuku said a unified monetary system union with a single currency calls for transformation of the current governance structure in the region that would be difficult without a political federation.
“The envisaged political federation should have preceded the Monetary Union protocol,” Dr Bukuku told a four day induction seminar for newly elected members of the regional Assembly at the East African Community headquarters yesterday.
The legislators are responsible for providing oversight functions to regional integration efforts, while at the same time, safeguarding the interests of their own countries.
And Dr Bukuku cautioned them that as long as the EAC partner states maintain their sovereignty status, the monetary union could hardly be realized.
“It is until there is a federal government… that can push it forward”, he told members of the East African Legislative Assembly (Eala). The monetary union protocol, the third EAC pillar, was signed by the then five partner states in Kampala, Uganda on November 30th, 2013. Its ultimate goal was to elevate the region into a single currency economy but its attainment has now been pushed to 2031.
Under the existing EAC Treaty the political federation will have to be preceded by the Customs Union, Common Market and Monetary Union protocols. The EAMU deadline has been repeatedly missed which has cast doubt on the member states commitment to a single currency by 2024.
“It is my opinion that the political union should have preceded the other three,” Dr Bukuku, who served as the deputy Secretary General in charge of Planning and Infrastructure, noted.
The respected economist said the political federation would address some of the hiccups associated with sovereignty issues.
He further added that the monetary union within the seven nation bloc was not a simple matter and required consensus among the political leaders.
Dr Bukuku, who served at the EAC Secretariat from 2011 to 2017, said the policy makers have not gone deeper on how the monetary and fiscal affairs in the EAC needed political support.
He wondered if all the seven partner states, Tanzania, Uganda, Kenya, Burundi, Rwanda, South Sudan and DRC Congo, have met the needed economic integration indicators to make a single currency viable.
The four macroeconomic convergence criteria include a ceiling of inflation at 8 per cent and a reserve cover of four and a half months of imports.
The two others are a ceiling of an overall budget deficit of three per cent of GDP and a public debt not exceeding 50 per cent.
Four institutions critically needed to roll out the monetary union have not taken off.
These include the East African Monetary Institute (EAMI) which would later be transformed into the proposed East African Central Bank.
The others are the East African Statistical Bureau (EASB) and the East African Financial Services Commission.