EAC states search for monetary union criteria

EAC states search for monetary union criteria

But according to a word on the ground, that may be unlikely, for countries like Uganda and Rwanda still have to make further studies and convince themselves that time for this Protocol should be soon. With the envisaged monetary union protocol for EAC countries to be made public this year, members are searching for ways to harmonize variables used in computing key economic indicators.

At the moment, the national agencies for the five countries-Tanzania, Kenya, Uganda, Rwanda and Burundi, are still using a different mix of household items to compile Consumer Price Index (CPI). Last week, officials at the Ministry for EAC and cooperation told the ‘Daily News’ in Dar es salaam that; “We are aware of discrepancies in the variables of computing key economic indicators in the region and a study is ongoing to agree on the variables before negotiations start.”

The Director of Trade, Investments and Productive Sectors in the ministry, Mr Bernad Haule, could not be reached to comment on the matter as but it is understood that a team of top government officials from the five EAC countries may finalise a study on how to go about the task , just in time for the April’s extra-ordinary summit.

The official said that going by a study commissioned earlier by the European Central Bank to guide the region, each of the five countries have a raft of housekeeping tasks to do before the monetary union springs to life. “When member countries agree on macroeconomic convergent criteria, it will make way for a protocol, “he said. Each country has to maintain annual GDP growth of at least seven per cent, keep inflation below five per cent and peg national budgetary deficit to five per cent of the GDP before the union is launched.

While inflation, for instance, peaked in November with 19.2 per cent for Tanzania, Uganda (29 per cent), Kenya (19.72) , Burundi (16.4 per cent) and Rwanda(7.39 per cent), the different basis for calculating these figures imply that they may not be comparable. As a result, institutions such as the envisaged East African Central Bank would find it impossible to apply monetary policies across the national borders to police the single currency expected out of a monetary union.

While each of the EAC countries derive weights for computing CPI from the household budget expenditure surveys, there is concern that some members take too long to update the list of items. The base period for CPI in Tanzania is 2001, Kenya and Rwanda was 2009, Uganda was 2005/06 while Burundi’s is the most outdated, based on a 1991 survey. Food, one of the most politicallysensitive items in the CPI basket, for instance, command a total weight of 48.8 percent in Tanzania, 36 per cent in Kenya compared to 51.9 per cent in Burundi, Rwanda’s 35 per cent and Uganda’s 27.2 per cent.

Recently, experts downplayed statistical differences in the region saying they reflect different economic environments under which each country operates. The signing of the East Africa Community (EAC) protocol in Arusha is expected to spur economic growth in the region. The Common Market Protocol, effected in 2010,is currently managed in accordance with relevant laws of the EAC and currently provides for the free movement of goods, persons, labour, services and capital.

The common market further provides for the right of establishment, the right of residence, free movement of services and capital within the region. The overriding objective of the Common Market is to widen and deepen cooperation among partner states in both economic and social fields for the benefit of citizens of the member states. East Africans have a chance to gain from the recent discovery of oil in Uganda following the signing of the Common Market Protocol by the Heads of the five EAC member states that form.

Officials at the ministry say the common market has accelerated economic growth and development of the partner states through the attainment of free movement of goods, persons, labor, services and capital. Under the protocol, partner states are obligated to guarantee free movement of persons who are citizens of other member states as well as to ensure non-discrimination of the citizens of the partner states.

“East African nationals now enjoy the freedom to apply for employment, accept offers of employment and move freely within territories of the partner states for the purpose of employment.” said the official National governments, however, limit the free movement of persons on grounds of public policy, public security or public health but must appropriately notify partner states. He affirmed that the common market has unlocked many benefits among the East African citizens in addition to driving the integration process to the next level of a monetary union.

There is need to establish new institutions and hire additional skilled personnel to be able to deliver services and outputs in line with the EAC Treaty and an urgent need for additional funding for the EAC institutions due to increased activities, projects and programmes. “We are welcoming a new East Africa of common interests and aspirations. The experiences of the last 10 years have showed that the borders separating the people within the EAC are superficial. It is now upon East Africans to accelerate the pace as the vision of the full integration is now within reach,” he said.

The protocol also enables the free movement of labor, services, capital and goods, people as well the right of establishment, right of residence and the removal of internal taxes charged on goods and service entering from a foreign country. Whether negotiations for EAC monetary union protocol may be complete, ready for signing by President Jakaya Kikwete and his four counterparts in December, this year, it remains to be seen.

The government has said completion of the 15 ...


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