The Minister of East African Affairs, Rebecca Kadaga has revealed that discussions into common East African Community currency are in high gear. Negotiations are also on to select which country will host the East African Central bank, which will oversee the implementation of the single currency by 2024.
She said: “I am optimistic that if all requirements and actions are taken and implemented, the East African monetary union will be realized and EAC will have a single currency by 2024. At the moment, the partner states are in the final stages of selecting to host the East African monetary institute that will later be converted into the EAC Central Bank.”
Kadaga made the remarks Tuesday, 21 June, 2022 during the East Africa Community Post Tax and Budget Dialogue 2022/2023 at Kampala Serena Hotel. She described the single currency policy as an important stage for integration as it will facilitate building the community which is a precursor to the political federation.
When asked on the EAC preparedness to implement the single currency by 2024, Fred Muhumuza, Senior Economist and Lecturer at Makerere University expressed skepticism about the EAC member states preparedness to implement the common currency arguing that the issue isn’t about just launching a currency without going through other preliminary processes.
He said: “From my own perspective, I think the preliminary requirement will take longer than 2024 because the first thing we want to have is political commitment and when you look through the monetary structure and policy indicators, you will see variance in quite a number of areas because a debt of one country can affect the currency of the whole region.”
Muhumuza cited an example of the European Union that had to intervene in the debts of Spain, Portugal and Greece because of the impact it would have on the Euro, actions he says the EAC needs to emulate before implementing the monetary policy.
“So you need to harmonise the debt structure, you need to harmonise your foreign reserves. So a common currency can be disrupted by any of the members. So bringing all the members and try to harmonise all the parameters is going to take us some time, so from my perspective I don’t think 2024 will be the right time to launch that currency,” said Muhumuza.
As of October 2020, the EAC member states debt was to a tune of USD120Bn and this was before the addition of Democratic Republic of Congo into the Union.
Kadaga also commended the EAC earlier leadership for the 2007 decision to harmonise their budgets as part of the efforts towards harmonizing their taxation regimes remarking, “This is important because when the budgets are read on the same day, it reduces the risk of policy leaks and unfair business practice.”
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