Rwanda’s President Paul Kagame has supported applications by the two Sudans to join the five-member East African Community.

President Kagame said a bigger trade bloc offered more opportunities to regional economies than challenges.

“We should be looking at it positively even though we are aware there are problems associated with this expansion,” President Kagame said at a press briefing last week.

Some member states have privately expressed opposition to Khartoum’s application, arguing that the country does not share a common border with any of the EAC states.

They are also uncomfortable with Sudan’s human-rights record and the fact that the International Criminal Court has issued an arrest warrant for President Omar al-Bashir for atrocities committed in Darfur.

Others, however, are of the view that Sudan can only join the community after South Sudan, which shares borders with Kenya and Uganda.

The treaty requires that any country wishing to join the EAC must be in geographical contiguity with other member states.

The final decision on whether to allow Sudan to join the EAC is expected to be made by the member countries’ presidents, at a Heads of State Summit to be held in Bujumbura, Burundi, next month.

President Kagame said the risks associated with a bigger trade bloc, should not stop member states from allowing others to join.
“Though bigger and broader integration comes with challenges, it also comes with benefits if you look at it in terms of trade, investment and different capacities,” President Kagame said.

On integration, the president said the agenda should not be derailed by the current economic crisis affecting the region.

Like other trade blocs, the EAC is experiencing a severe economic crisis that has seen the region’s currencies depreciate sharply against the dollar, pushing inflation into double digits and threatening the economic stability of the region.

“We have to keep doing the best we can for ourselves to achieve stability; and therefore this calls for deeper integration and not less,” President Kagame told a press briefing.

He said the region’s economies, people and businesses were linked and interdependent, adding that member countries cannot afford to relax but must work harder towards integration.

While Rwanda was in relatively better shape, the president warned that the country was not fully shielded as the problems affecting its neighbours were likely to spill over in terms of imported inflation.

Rwanda is a net importer in the region and large percentage of its imported goods come from the other EAC member states.
“We want to put our efforts together with the rest of the region to see what we can do together for our economies,” President Kagame said, calling for concerted efforts to deal with the crisis.

Inflation

Rwanda’s inflation remains the lowest in the region at 7.52 per cent (as of August) compared with Uganda’s 28.3 per cent and Kenya’s 17.3 per cent in September, while Tanzania’s inflation rate was estimated at 14.1 per cent and Burundi’s at 11.0 per cent in August.

In addition, the franc has only depreciated by 0.9 per cent against the dollar between December 2010 and September 2011, while against regional currencies it actually appreciated — by 14.0 per cent, 15.1 per cent and 9.5 per cent against the Kenyan, Ugandan and Tanzanian shillings respectively, while depreciating by 2.4 per cent vis-à-vis the Burundi franc between September and December 2010.

“We have to keep focusing on integration, how can it work; we have to think about how integration works for us and not how it does not work for. This is the best way to approach it,” he said.

Surging threats to the global economy, including the Eurozone crisis and a possible slowdown in China and the global economy, could dim the outlook of economies in the region, experts have warned.

“The outlook for East African countries is slightly below the African average,” said Shanta Devarajan, the World Bank’s chief economist for sub-Saharan Africa recently.

Economies in the region are forecast to grow by an average of 5.8 per cent in 2012, down from the previous forecast of 5.9 per cent. While the region had weathered the global economic crisis in 2008/2009, Mr Devarajan said the countries may not be in a strong position to deal with another crisis.

“For instance, Kenya is one of the few low-income countries that did not even need debt relief in the HIPC [highly indebted poor countries] initiative. But it has now been running fiscal deficits of about 5-6 per cent a year and the debt to GDP ratio is over 50 per cent. That leaves less room to manoeuvre,” he observed.

However, though the current economic crisis has raised fresh doubts over the possibility of an EAC Monetary Union next year, Dr Richard Sezibera, Secretary General of the EAC, has reaffirmed that negotiations would proceed despite “the complex issues involved in the establishment of this Monetary Union as well as a challenging regional and international economic environment,” adding, “I am confident that we can reach agreement on the major issues relatively soon.”

“We also learning lessons from monetary unions that have worked; the Eurozone is important but in some respects it is an outlier,” Dr Sezibera told an East African Investors Conference organized by Renaissance Capital in Kigali last week.

He added that the region was looking to places where the monetary union has worked, including the USA and West and Central Africa.

He also argued that integration had been proven to be a critical contributing factor to the stability and growth that the economies of the region, especially over the past five years.

“Despite the current inflationary pressures that the region is experiencing, on account of the rising world food and fuel prices and the threat of a global recession, the economies have registered on average 5 per cent annual GDP growth compared with a world average of 3 per cent,” Dr Sezibera said.