East Africa: Monetary Union to Emulate Euro System
Published on 09-15-2009 Email To Friend Print Version
Dar es Salaam — The East African Monetary Union (EAMU) has all the makings that it will be patterned on the Euro monetary union by 2012 when it will be introduced.
This was revealed in Dar es Salaam during discussions among the East African Community Secretariat, the European Central Bank (ECB) and Tanzania’s strategic collaborators.
The EAC, which is conducting two-week consultations in all five member states on the establishment of the EAC Monetary Union (EAMU), said the preliminary study has been completed and a team of the European Central Bank that prepared the study is currently taking opinions of stakeholders before it submits its final report to the EAC Secretariat in Arusha in January 2010.
The meeting, the first of six scheduled meetings, took place in Dar es Salaam on September 7-8, and was followed by another one in Nairobi, Kenya on September 10-11, before moving to Kampala, Uganda on September 14-15. The ECB/EAC study team will then hold other meetings in Kigali, Rwanda on September 17-18, and Bujumbura on September 21-22, before they return to EAC Secretariat headquarters in Arusha for September 24-25, 2009 discussions.
The EAC said the consultancy being conducted by the ECB consultants will mark the culmination of third phase implementation of the EAC Treaty whose first two stages recorded positive objectives: the customs union is in place and the common market will come into effect in January 2010. The last phase will be an East African political federation.
The discussions in Dar es Salaam involved the Bank of Tanzania, the Treasury, the Planning Commission, the Bureau of Statistics, the Bankers Association, academia, the private sector and other stakeholders.
According to the ECB, the discussion paper they have prepared is intended to stimulate reflection and discussion between the various stakeholders and the ECB and EAC, but cautioned that the observations contained in their discussion paper were merely tentative and do not prejudice the final outcome of the study. The ECB paper draws a lot of experience from the 27-nation European Union.
The ECB was been contracted to take stock of current preparedness, take proposals, to design a model for protocol negotiations, to propose for the monetary institute and propose a monetary criteria.
In the discussions, the ECB team emphasized on the importance of abiding by the monetary union protocol, the legal framework that will stipulate operations, the monetary law, judicial review and accountability of the institution and its staff.
“To function smoothly and to bring about economic benefits for all EAC partner states, EAMU should therefore start with a high degree of sustainable monetary and economic convergence and compatibility among the partner states,” the ECB team stressed.
“To reap benefits from a single currency, EAC partners should enjoy a good measure of economic integration (trade and financial flows and cross border movements of people and enterprises).
Integration of financial markets is indeed necessary for monetary policy to work across the whole area,” the ECB study says. “Click here for reuse options!