NAIROBI, Kenya, Feb 15 – The World Bank has extended a $16 million (Sh1.3 billion) grant to the East African Community (EAC) to support the region’s Financial Services Sector Development and Reorganisation Project (FSDRP).
The project to be implemented in two phases over a nine-year period will support EAC efforts towards building a single financial services market for the region.
The grant, which will cater for the first phase of the project (EAC- FSDRP I) was approved by the World Bank Board on January 31.
EAC Deputy Secretary General (Planning and Infrastructure) Alloys Mutabingwa said the harmonisation of the financial services sector would play a key role in unlocking some of the benefits of the Common Market by removing barriers to the free movement of capital across the EAC region, as provided by the Common Market.
The project has six components, which include Financial Inclusion and Strengthening Market Participants, Harmonisation of Financial Laws and Regulations, Mutual Recognition of Supervisory Agencies, Integration of Financial Market Infrastructure and Development of a Regional Bond Market and Capacity Building.
Phase 1 of the project commences this year and will end in the first quarter of 2014.
The EAC regional integration commenced with the Customs Union in 2005, which was the entry point to the East African Community. The Common Market Protocol, which provides for the free movement of goods and services, persons, labour, and capital, came into place In July last year.
The third pillar of regional integration is the East African Monetary Union that is expected to come into force by 2012. The timeline has however been termed unrealistic by economists who argue it is too rushed.
Mr Mutabingwa also voiced his concern saying: “When coming up with a common currency, a number of factors must be considered. Like in the case of the European Union, a common currency requires a common interest rate, which central banks must work and this has not been achieved.”
He however expects the grant to assist regional economies to iron out their difference and fast track the monetary integration process.
Speaking during the signing of the agreement, World Bank representative John Murray McIntire commended the EAC for what he described as the “excellent work” it was doing.
EAC Secretary General Juma Mwapachu thanked the World Bank for “seeing the importance of this project”, highlighting that a strong regional financial sector is needed to underpin an effective common market.
Follow the author at https://twitter.com/MjKaranja