EAC takes single currency plans to another level

BY BUSINESS REPORTER

THE East African Community’s (EAC) single currency plan has gone a notch higher, with the Monetary Union negotiating team embarking on a study tour of European Union (EU) Friday.

The 12-day tour is aimed at enhancing the region’s understanding of the EU’s economic and monetary union, including relevant institutions necessary for a successful monetary union.

The team visiting Brussels, Luxembourg, Frankfurt and Berlin would share experiences and interact with officials from EU and EU Member States’ institutions who have an active role in the union’s economic and monetary union affairs, the EAC Secretariat said in a statement Wednesday.

During the tour, the team will study the formulation and conduct of monetary union policy in the Euro zone, interaction between fiscal and monetary policies, design of macroeconomic convergence criteria and surveillance and compliance mechanism with regard to macroeconomic convergence.

The tour led by the Deputy Secretary General in charge of Planning and Infrastructure, Dr Enos Bukuku, will also help the group to better understand the prerequisites for a monetary union.

The team would also seek to familiarise with conversion rates and currency changeover, the transitional arrangements to a monetary union and discuss the current euro crisis and lessons to be learnt.

Monetary talks

The tour comes at a time when the EAC Monetary Union talks are in highgear, with the High Level Task Force having negotiated 49 Articles –more than half the number of Articles in the draft Monetary Union Protocol – after the six rounds of talks held between January and December last year.

Negotiated so far are Articles on the scope of the Union, macroeconomic policy framework, monetary policy framework, exchange rate policy and exchange rate mechanism and instruments of monetary control.

Also negotiated, according to EAC Secretariat are Articles on harmonisation and co-ordination of fiscal policies, taxation and customs, national Budget formulation processes, domestic and external debt management frameworks, joint financing of projects and macroeconomic convergence.

Provisions on co-ordination of monetary policy and fiscal policies, restrictions on Central Bank lending to public entities and restrictions on privileged access to financial institutions have also been discussed.

Others are conditions for bailouts, conduct of foreign exchange transactions by Partner States, management of foreign exchange reserves and determination of conversion rates, among others.

Furthermore, various studies the EAC commissioned with the aim of enriching the negotiations are at various stages.

These include, among others, a study on the review of the EAC macroeconomic convergence criteria and another on a harmonised monetary policy framework for the region (jointly done by EAC and IMF).

Another study on a common exchange rate mechanism has been undertaken jointly with the International Growth Centre.