Monetary Union and federation will hasten EAC integration

Saturday April 6 2019

single currency

Kenya, Tanzania, Burundi, Rwanda and Uganda currencies. FILE PHOTO | NMG 

PETER MUNAITA
By PETER MUNAITA
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The East Africa Community is weighing the possibility of fast-tracking the last two phases of its integration project in a bid to end the inertia that is frustrating the smooth running of its Customs Union and Common Market, officials said.

EAC Secretariat experts and top government officials from five of the six member states said at a recent meeting in Kigali that the region needs to immediately bring the planned Monetary Union and Political Federation into effect to increase its chances of success. Burundi skipped the meeting.

Participants at the March 29 meeting said lack of political will remains at the centre of the funding and non-tariff barrier challenges that continue to dog the integration project.

“Doing the same thing will not get us far in addressing the challenges. More transparency and accountability is needed in dealing with each other,” said Kenya’s EAC Minister Adan Mohamed.

Multi-pronged path

People familiar with the discussions said delegates had agreed on a multi-pronged integration path that would include fast-tracking the monetary union and political federation, arguing that only such level of unity will make the community strong enough to withstand global competition.

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Under the EAC integration timetable, a monetary union was fixed for 2024, offering member states about five years to progressively move towards a single currency. Its protocol was signed on November 30, 2013.

No date has been set for a Political Federation but EAC heads of state have since adopted a political confederation as a transitional arrangement for the ultimate realisation of an East African political federation.

They also endorsed the drafting of an East African constitution at a summit last year, giving impetus to the federation plan.

Meanwhile, the individual member te central banks are understood to be working on the transferability of local currencies across their borders, in order to reduce the current reliance on hard currencies.

Mr Mohamed said the EAC’s problems are not structural in nature and can be resolved with strong political will.

“Why are we not obeying the Common External Tariffs? If they are not working we should look at refining them rather than going back on them to appease business lobbies,” Mr Mohamed said.

NTBs

The meeting particularly discussed the persistent non-tariff barrier challenges between Kenya and Tanzania even as it avoided the ongoing diplomatic tiff between Uganda and Rwanda.

Multiple sources at the meeting said the Uganda-Rwanda stand-off alongside Burundi’s closure of its border with Rwanda were listed among issues in need of political will.

“We are facing issues of implementation, especially with regard to non-tariff barriers between Kenya and Tanzania. There are political issues that need political will,” Rwanda’s State Minister for East African Community Affairs Olivier Nduhungirehe said.

Diplomatic relations between Rwanda and Uganda have deteriorated in recent weeks over alleged support to armed groups, arbitrary arrests and torture of citizens and economic sabotage through blockade of goods.

Mr Nduhungirehe said diplomats would handle the challenges at bilateral level.

Rwanda and Uganda have also yet to agree over their roles in the building of a standard gauge railway from the port of Mombasa while Kenya and Rwanda have outstanding issues over the planned building of an East African Power Pool.

The Kigali meeting left these issues to be handled by the Heads of State Summit.

No date has been set for the meeting yet.

“We are still in the SGR project and are waiting for Uganda to do its leg so that we can take up ours. There are no timelines yet because even aspects such as funding are yet to be arranged,” Rwandan Minister for infrastructure Claver Gatete said.

Recognition agreements

The Kigali meeting also resolved that East African standards bodies should sign mutual recognition agreements allowing goods that meet quality marks in one member country free entry into others.

Conflict of standards, has been one of the biggest non-tariff barriers in the region.

EAC chairman Paul Kagame called the Kigali meeting in the wake of growing apathy between member states that saw last year’s summit, usually held in November, postponed to the first quarter of this year. It is yet to be held.

Rwandan officials said the outcomes of the Kigali retreat would be shared with the Council of Ministers for adoption during the April 15 meeting. A summit of the heads of state would be called thereafter.

EAC Secretary-General Liberat Mfumukeko criticised member states for abandoning the Common Market Protocol they signed in 2010 by failing to allow free movement of people, goods, capital and establishment.

He gave the example of students enrolled in East African universities outside their home countries who are being charged international student fees.

“The region is facing increased denial of entry of citizens into a partner state without being furnished with reasons for that denial. There is also confiscation of travel documents by immigration officials upon arrival in a partner state, followed by the requirement to report to a police station daily, similarly without due process,” Mr Mfumukeko said.

Evidence of the apathy is also visible in member states defaulting on funding the Secretariat, of whose half annual budget is donor-supported.

At the end of January, member states had only ceded 45 per cent of their contributions, with Burundi and South Sudan having arrears dating back to 2017.

Kenya has paid 80 per cent of its allocation, Tanzania 63 per cent, Rwanda 62 per cent and Uganda 53 per cent.

Despite the challenges, the EAC is growing at an average rate of six per cent, twice that of the rest of Africa.

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