East Africa: EAC Members Embark on Tight Schedule for Monetary Union

Business Daily (Nairobi)

George Omondi

30 March 2011

Financial sector regulators are racing against time to standardise methods for compiling and presenting data in a process to integrate services ahead of next year’s launch of the East African Community monetary union.

Uniform monetary and financial statistics will allow institutions such as the East African Central Bank and East African Monetary Institute, which are envisaged under the monetary union, to share data and formulate regional monetary policy, said Central Bank governor Njuguna Ndung’u

Currently, each of the five member countries – Burundi, Rwanda, Uganda, Tanzania and Kenya – is running own data collection, storage and processing centres.

Technocrats negotiating the plan have 18 months to develop and agree on convergence indicators including inflation levels, budgetary deficit, and GDP growth.

Convergence criteria

“Computation, concepts, definitions and methods used in compiling indicators that determine convergence criteria must be understood, harmonised and consistent across all partner states,” Prof Ndung’u told a workshop in Nairobi on Tuesday.

The workshop comes weeks after the region’s central bank governors approved the hiring of consultants to lead the harmonisation of financial services, setting the stage for a single currency.

The private sector has raised concerns that the various reporting standards, practice and licensing were likely to undermine integration.

From last year, the International Monetary Fund has been equipping EAC member states to upgrade systems to international standards.

Too soon

Businesses are also harmonising tools to conform to the requirements of a monetary union. They have, however, said 2012 is too soon.

“We are working hard to achieve the target but we seem not to have the pace required to meet the ambitious target of single currency by 2012,” said Habil Olaka, CEO of Kenya Bankers Association.

The region’s bankers last week formed the East African Bankers Association to fast track harmonisation of banking practices and accounting standards in the region.

The regional lobby also seeks to recognise best banking sector values at national levels and propel them to regional platform.

Mr Olaka however said the private sector appreciates the enormous task that lies ahead of the region’s negotiators before they can be able arrive at the criteria for converging a number of macroeconomic indicators that are required before a monetary union becomes a reality.

“The convergence criteria will need to be developed and formally agreed upon before an implementation timeline is put in place and given the different levels at which the respective member countries are, 2012 may look ambitious.” he told the Business Daily in an interview.

On Tuesday, Prof Njuguna said the EAC secretariat has already provided a roadmap on how statistical harmonisation can be achieved within the region but called for institutional and legal frameworks to back the initiative.

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