EAC Secretariat, Arusha, Feb 27 – A joint meeting of the EAC Monetary Affairs Committee (MAC), Fiscal Affairs Committee (FAC) and Capital Markets, Insurance and Pensions Committee (CMIPC) to consider the final report on the establishment of a Monetary Union among the EAC Partner States started on Friday in Tanzania.
The technical session, which is being chaired by Dr Abdiel G. Abayo, the Director of Market Supervision and Development at the Capital and Securities Authority of Tanzania, was officially opened by the EAC Deputy Secretary General in charge of Planning and Infrastructure, Mr Alloys Mutabingwa.
The Deputy Secretary General informed the delegates that the joint meeting had been convened to discuss the next steps in the establishment of the proposed East African Monetary Union following the conclusion of the validation workshop on the Draft Final Report on the establishment of EAC Monetary Union held in January 2010 in Kampala, Uganda.
Mr Mutabingwa said the Common Market Protocol that was signed in November last year was to become operational on 1 July 2010 and the Protocol had critical impact on the establishment of a single market in the region which was a prerequisite for the Monetary Union. He said the implementation of an efficient EAMU will probably require the operationalisation of a fully fledged EAC Common market.
The Deputy Secretary General informed delegates that the EAC Secretariat working with national experts from Central Banks in a technical meeting held in Bujumbura from 10-12 February 2010 developed a draft road map to the realisation of EAMU as a basis for discussions during the joint meeting.
According to the different options put forward for discussions, delegates were to make suitable recommendations taking into account the implications (in terms of advantages and disadvantages of each option) especially in the following; the legal framework for a sound and sustainable East African Monetary Union (EAMU), looking at whether to go for the completion of a comprehensive EAMU protocol including the completion of legislative instruments for the Monetary Institute (EAMI) and the Central Bank.
The alternative option was to negotiate first a separate protocol or a Bill on EAMI before negotiating the protocol on EAMU on a basis of fast tracking the EAMU.
Others include the issue of macroeconomic convergence criteria; the need to ascertain the time frame for realising the EAMU; the need to look at the proposal on the establishment of a High Level Task Force for the negotiations of the EAMU Protocol; as well as the proposal to establish a Sectoral Council of Ministers responsible for Finance to guide EAMU process.
The technical officials’ session runs from 26 to 28 February; the session for Permanent Secretaries of Ministries of Finance, Governors of Central Banks, Heads of Capital Markets/Insurance/Pension Institutions, Commissioners’ General of Revenue Authorities is on 1 March; while the Ministers of Finance’s session is on 2 March 2010.
Officials from the Ministries of EAC Affairs in the Partner States are also to attending the meeting.
The significance of the Monetary and Financial Co-operation in the EAC integration process is clearly stipulated in Articles 83 to 86 of the Treaty for the Establishment of the East African Community. Consequent to that, several Council Decisions and Summit Directives have all underscored the need for a Monetary Union among the EAC Partner States.
In line with the Treaty provision, the 6th Extraordinary Summit of EAC Heads of State that was held in Ngurdoto Mountain Lodge, Arusha, Tanzania on 20 August 2007 directed among others, that there is need to move expeditiously towards establishing a Monetary Union by 2012.
In that regard, during the Governors’ meeting held in Kampala, Uganda on 23 January 2008, it was agreed on:
(i) The necessity of developing a strategic framework for fast tracking the establishment of an EAC Monetary Union by 2012; and
(ii) The importance of reviewing regularly the ongoing efforts by the Central Banks to fast track the Monetary Union which include: The adequacy and the timeframe of the macroeconomic convergence criteria; harmonisation of macroeconomic statistics; and harmonisation of frameworks for the studies commissioned by the Central Banks.
In order to develop a strategic framework for fast-tracking the establishment of the EAC Monetary Union, the meeting observed that it was opportune to carry out a comprehensive study on the EAC Monetary Union whose major objectives are:
i) To take stock of the current state of preparedness of the EAC Partner States for a Monetary Union;
ii) To make proposals on the institutional framework and structure of the proposed EAC Monetary Union;
iii) To design a model protocol for the EAC Monetary Union that will form the basis for the Monetary Union negotiations among the EAC Partner States;
iv) To propose an institutional framework for the East African Monetary Institute which will precede the creation of an East African Central Bank; and
v) To propose a mechanism for the monitoring and enforcement of the macroeconomic convergence criteria among the EAC Partner States.
Since that date, the Terms of Reference and the budget for the study have been considered by the Monetary Affairs Committee and approved by the Council of Ministers and the EAC Secretariat sourced for a consultant to undertake a comprehensive study on the Monetary Union among East African Partner States.
After an internationally competitive bidding process, the consultancy was awarded to European Central Bank (ECB). The selection of ECB was judicious because of its wealthy experience in monetary integration.
In that context, the ECB team working closely with the EAC Team comprising five national experts from the EAC Central Banks and EAC staff have so far submitted a draft final report which has been considered and accepted by the Secretariat and the key stakeholders of Partner States during a validation workshop held in Kampala on 18-20 January 2010.