Thursday, January 26, 2012

The East African Community Learns Lessons of the EURO for its Monetary Zone...but why not consult ECOWAS, too?

Never mind the fact that Britain left 2011 causing a stir with its emphatic stance on the Euro. Never mind the fact that in the 20th anniversary of the Euro, the Europeans, especially Germany and France, are at loggerheads with other European countries over the future of the Euro, it beggars belief that the five-member East African Community are still keen to learn "lessons", which they can adopt for themselves as they anticipate a common currency for the East African sub-region.

Still, if we can get past this minutae,we can probably use it to underscore the fact that the ever-increasingly-regionalized world some of us talked about is developing right before our very eyes. Great will be the day when EAC will ask the West African Monetary Zone(WAMZ) -- comprising Ghana; Guinea; Gambia; Liberia; Nigeria and Sierra Leone -- on lessons over a common currency. Given how convoluted and long the process has been for West Africa, I would have thought the EAC might want to also visit ECOWAS for thoughts on overcoming some of the challenges.

In my view, the fact that the EAC went straight to the beleaguered EU can speak of, at best, a degree of tunnel vision and, at worst, myopia on East Africa managing its own regional integration in Africa when it has formidable African integration actors in the African Development Bank and the UN Economic Commission for Africa??

Enjoy the article below!:


EAC team learns workings of eurozone's monetary union  Send to a friend
Thursday, 26 January 2012 10:19

By Felix Lazaro, BusinessWeek Reporter
Dar es Salaam. Negotiations for the creation of the Monetary Union in the East African Community are at an advanced stage and the region is determined to learn from lessons from other regions to make the envisaged arrangement a success.

But as an EAC mission, dispatched on a study tour to the embattled Eurozone two weeks ago, is about to come back, the region must do its homework before it plunges into a monetary union arrangement, analysts who spoke to BusinessWeek said.

The EAC must check the speed with which it moves towards the creation of a single currency, Hussein Kamote from the Confederation of Tanzania Industries said.

This is because economic challenges and issues to be worked upon, both by each member states and collectively as a region to make the union sustainable, need more time and resources, according to Mr Kamote the director of Policy and Advocacy at CTI.

 "It is not about stopping the negotiations. Rather we should make sure the deadline is realizable. Negotiations to create the Eurozone took quite a long time, and is still faced with challenges. We must be more careful," said Mr Kamote who is also an Economist.

The EAC member states currently face a myriad of economic problems characterized by high inflation rates and production costs partly as a result of power problems.

While inflation, for instance, peaked in November with 29 per cent for Uganda, followed by Kenya 19.72, Tanzania 19.2, Burundi 16.4 per cent and Rwanda 7.39 per cent, the different basis for calculating these figures implies they may not be comparable.

Going by a study commissioned earlier by the European Central Bank to guide the region, each of the five countries has a raft of housekeeping tasks to perform before the monetary union springs to life. Each has to maintain an 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.

In addition, to the fact that member states budgets are heavily donor-dependent, the ongoing economic realities should prompt authorities to re-think about the EAC MU deadline.

The heads of state of EAC countries had put this year as the deadline for the creation of the MU but analysts say the deadline is unrealizable.

The EAC-MU at an advanced stage and a team of top government officials from the five countries, who have been negotiating the monetary union protocol since last year, are expected to finalise their report by end of March, just in time for the April's extra-ordinary summit of heads of state. The next round of negotiations is scheduled for Arusha.

A lecturer from Mzumbe University Dr Elisante Ole Gabriel said the EAC members should work on the issue of consistency to avoid divisions and lack of commitments to the negotiations by member states. Already some member states are giving signals that show that they are now entirely comfortable with the entire EAC MU project.

Mr Kamote also urged the EAC to create an autonomous organ like the EU Commission to deal specifically with issues of strengthening the monetary union to relieve the EAC Secretariat whose mandate is not strong enough.

The 20 member delegation from EAC toured Europe for 12 days to learn on issues pertaining to the Eurozone. They visited the Commission and European Development Fund in Brussels; European Central Bank and the German Federal Bank in Frankfurt; Federal Ministry of Finance and Federal Ministry of Economic and Technology in Berlin, and European Investment Bank in Luxembourg.

The delegation comprised chief negotiators of a high level task force negotiating the EAC MU protocol from each country member, five officials from EAC Secretariat led by deputy the Secretary General in charge of Planning and Infrastructure.


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