The East African Community (EAC) met in Arusha, Tanzania, yesterday, and it now has the potential to achieve its goal of having a common currency by 2031.
In November 2013, the member states of the East African Community signed the agreement establishing the East African Community Monetary Union (EAMU).The EAC Partner States were able to gradually converge their currencies into a single currency in the Community thanks to the EAMU, which also set the foundation for a monetary union within ten years.
EAC Secretary General Veronica Mueni Nduva stated on Wednesday that the process has been extended to 2031, according to an article published in Tanzania’s The Citizen Newspaper on Thursday.
According to the Monetary Union Roadmap, the Monetary Union was scheduled to be founded in 2024. But since it was not realized, the deadline was changed to 2031,” the speaker stated.
She was addressing during a roundtable that included the management teams of the East African Business Council (EABC) and its executives, as well as the management teams of the EAC Secretary General and her team.
According to her, while members continue to disagree on a number of other issues, some of the roadmap’s recommendations have been adopted thus far.
Among the facets is the creation of the legal framework necessary to establish organizations that will back the Monetary Union. She stated that the instruments were presently undergoing different phases of approval or operationalization.
She also mentioned that the East African Payments System (EAPS), a multicurrency platform that facilitates settlements in the native currencies of the partner states, was formed by the central banks of the Economic Community of East Africa (EAC). This facilitates currency convertibility throughout the area.
“Partner States have agreed to exchange currencies and return funds, and they are putting this agreement into practice. The Sectoral Council on Finance and Economic Affairs is now reviewing a draft law that would harmonize excise taxes. The Council is currently reviewing an EAC Avoidance of Double Taxation Agreement that has been drafted, according to Ms. Nduva.
However, reaching an agreement on which nation should host the East African Monetary Institute (Eami) has proven to be a slow process. The East African Central Bank was modeled after the Eami.
The failure of member states to successfully converge the four macroeconomic fundamentals, according to her, is the other difficulty.
These include an eight percent headline inflation rate, a foreign exchange reserve cover equal to 4.5 months of imports, a three percent GDP ceiling on the overall fiscal deficit, and a fifty percent GDP cap on gross public debt for all partner states.
The purpose of the meeting was to assess the status of executing EAC promises to increase intra- and extra-EAC trade and investment, as well as to establish and present the business sector’s policy advocacy priorities.
The main topics of discussion were identifying trade and investment restrictions that the private sector faces and suggesting possible remedies.
However, Ms. Nduva stated that the EAC is still working to coordinate the implementation of a framework for the liberalization of the air transport markets in the area, which would promote competition and drive down airfare prices through the forces of the market.
According to her, the EAC has produced draft strategies to lower the cost of air travel in the EAC territory and approved draft laws for air liberalization.
Adrian Njau, Executive Director of the EAC, stressed in his remarks that the EABC places a high premium on policy advocacy related to trade, investment, and industrialization.He stated that the goals of these initiatives are to lower obstacles and improve trade and investment opportunities within the EAC as well as outside of it.
He stated that the EABC is of the opinion that the EAC would continue to be the fastest-growing economic bloc on the continent if the private sector actively participates in the integration process.
The EAC’s GDP is expected to expand by 5.1 percent this year, up from 4.9 percent in 2023.”The share of intra-EAC trade can grow from the current 15 percent to 40 percent by 2028 through public-private partnerships and a conducive business environment,” he continued, adding that intra-EAC commerce has grown by 14 percent to $12.2 billion in 2023.
However, this accounted for a mere 15% of the overall trade inside the EAC, meaning that the remaining 85% of trade was with other countries.According to Njau, EAC exports to the global market increased from $25 billion in 2022 to $26.9 billion in 2023.
Additionally, he emphasized that the overall value of imports from Africa climbed from $7.9 billion in 2022 to $9.7 billion in 2023, matching the amount of exports to Africa of $9.7 billion in 2023.
He invited attendees to discuss what should be done differently in order to industrialize and provide job possibilities for the increasing number of young people in the EAC.
