Talks on monetary union now take shape

Ministers from the regional economic bloc have brought to a close negotiations that had dragged on for two years by agreeing on a draft protocol for the creation of a monetary union.

Meeting in Arusha, the Council of Ministers adopted the draft East African Community (EAC) monetary union protocol. They also adopted a roadmap to the creation of the monetary union.

This means the region is one step closer to having a single currency.

“This was historical because it has established the legal and institutional framework for the progress to the third pillar of integration which is the Monetary Union,” said Council of Ministers chairperson, Prof Tarsis Kabwegere.

The five countries in the EAC are pursuing integration which will culminate in a political federation. Already, the countries have signed treaties for the creation of a common market and customs union.

Once the monetary union is in place, the Community will have a central bank and governments will have to co-ordinate their monetary and fiscal policies.

However, implementation of the first two stages of integration has remained lackluster, leading experts to warn that the monetary union may not be successful given that it is built on the free movement of goods and free exchange of factors of production.

Occurrences in Europe during the Euro Zone crisis have also posed a cautionary tale for the region.

“Given the financial sector challenges in other parts of the world, some people in our region could be skeptical of the Monetary Union.

It is, therefore, your expertise to reassure them that them that our Monetary Union is viable,” EAC secretary general Richard Sezibera told the ministers.

The document will now be referred to the sectoral council on legal and judicial affairs, which meets in Bujumbura next week, for legal input.