Having sailed through one of the most tedious processes of establishing a regional common market, all eyes are now swiftly shifting to the creation of a monetary union in East Africa.

The development, which will pave way for the creation of a single central bank and a single currency, is seen as one of the most challenging shifts the region will undergo in the near future.

Initially projected to be in place by 2015, economists say the proposed merger of currencies will require sufficient political by the partner states. This could lengthen the currency shift.

In a report on the creation of a monetary union by the European Central Bank (ECB) released early this year, it was argued that the changeover from national currencies to a single one “must be properly anchored in society and particularly in the financial industry.”

It suggested two strategies for the achievement of the East African Monetary Union (EAMU).

In the first option, EAMU would be kept as an aim with no firm public timeframe until all prerequisites appear to be within reach.

Under the second option, partner states would commit themselves to a firm date for the start of EAMU, relying on an institutional drive to act as a catalyst for implementing the necessary preparatory work.

Analysts say the first option has allows the rescheduling the EAMU without much reputational loss if convergence remains insufficient.

But the lack of a published deadline may deprive the project of the necessary political drive to maintain motion.

The second option, however, would set a deadline for EAMU but may carry the risk that EAC partner states rush into monetary union prematurely.

The commissioner for economic affairs at the African Union, Maxwell Mkwezalamba, says a cautious move will ensure that economic differences among partner states are minimised when they enter the common currency zone.

He says the region should experience broadly synchronous economic cycles, similar external shocks and similar inflation and growth rates for a successful monetary union to be realised.

Today, EAC states experience almost the same inflation rates, especially after Kenya revised its inflation calculation technique late last year.

The ECB study cited two phases of the convergence criteria the region should pursue.

In the first stage, the primary criteria include maintenance of an overall budget deficit to gross domestic product (GDP) ratio of not more than six per cent, excluding grants, and of not more than three per cent including grants.

Annual average inflation rates should not exceed five per cent while external reserves are expected to cover more than four months’ imports of goods and non-factor services.

The secondary criteria include achievement of sustainable real GDP growth rate of not less than seven per cent and a national savings to GDP ratio of not less than 20 per cent.

In addition, countries are expected to ensure that their ratios of total domestic and foreign debt as a percentage of GDP and the balance of payments deficit on current accounts, excluding grants as a percentage of GDP, are sustainable.

A general opinion is that proper systems should be put in place to ensure that all partner state’s economic situation, especially those at the periphery, are factored in the monetary marriage to avoid what happened in the Euro zone recently.

A financial crisis there has laid bare the structural weakness of the Euro zone.

“It is one currency, but 16 different fiscal regimes. Currency union without political union and without a budgetary mechanism to move resources from richer to poorer areas was always a recipe for tension, as opponents of the UK joining the single currency have long pointed out,” Ruth Sunderland of The Observer said recently.

It is this rush that has apparently led to a pile-up of Spain’s debts, soaring unemployment and the deepening of its budget deficit.

Between 2000 and 2008, the country’s prices of goods rose by 35 per cent compared with a 10 per cent rise in Germany.

However, the European model has helped cushion its members against the adverse effects of the economic meltdown, among other problems.