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East African monetary union Bills top EALA’s agenda

Saturday December 16 2017
By The EastAfrican

The East African Legislative Assembly (EALA) is expected to start its sessions in the coming week with a focus on Bills on key institutions that will help in the establishment of a single currency.

The absence of enabling institutions and the inability of member states to comply with the convergence indicators have slowed down the momentum of creating the East African Monetary Union (EAMU).

A source told The EastAfrican that the EAMU Bills are top on the incoming EALA’s agenda.

“The delay was because of the processes the Bills had to go through from development and clearance. The term of the previous EALA ended before considering the Bills,” said the source.

The Bills to be debated include, one that establishes the East African Monetary Institute and the East African Statistical Bureau.

But the fate of the Bills establishing other institutions such as the East African Financial Services and the East African Surveillance, Compliance and Enforcement Commission remains unclear.

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As per the House’s timetable, all legislation for the creation of the institutions for the single currency regime were to be passed by the end of 2015.

Task force

The EAC Council of Ministers at its meeting in Kampala directed partner states to form a task force to draft a Bill for the establishment of the EAC Stabilisation Fund.

The fund was proposed by the International Growth Centre as a short-term lending facility to partner states experiencing external economic shocks.

The EastAfrican has learnt that EAC member states are struggling to comply with key economic targets on public debt, inflation, forex reserves and budget deficit.

The increasing demand for infrastructure projects is frustrating efforts by the partner states to reduce their debt-to-GDP ratio to 50 per cent and fiscal deficit to as low as three per cent of the GDP.

Compliance with these targets, including an overall inflation target of eight per cent and forex reserves target of 4.5 months of import cover, has been mixed across the five member states.

For example, Kenya’s debt-to-GDP ratio stands at 56 per cent while that of Uganda is estimated at 33.8 per cent; the average inflation for Kenya and Rwanda in 2016 stood at 6.3 per cent and 7.3 per cent respectively.

Convergence criteria

To qualify for the monetary Union each member state is required to meet the convergence criteria and comply with them for at least three years, meaning there are only four years remaining to the deadline for compliance in 2021.

Betty Maina, Kenya’s Principal Secretary for East African Affairs, told The EastAfrican that although there have been some delays in timelines for the monetary union, the building blocks such as realignments of central banks, capital markets and stock exchanges are proceeding well.

The EAMU Protocol outlines a 10-year roadmap towards a monetary union in 2024. The common currency is the third pillar of the EAC integration process after the Customs Union and the Common Market. It will be followed by the final pillar—political federation.

Reported by James Anyanzwa, Fred Oluoch and Christabel Ligami.

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