East Africa ministers of finance have finalised and signed off requirements that member states must fulfil before implementing the East African Community Monetary Union (EAMU).

The requirements which include harmonised statistics as well as fiscal and monetary affairs indicators, are contained in the EAMU Protocol concluded at the July 16 East African Community meeting in Arusha.

The Protocol, which contains strict benchmarks for partner states to maintain, including a debt to GDP ratio of less than 50 per cent, and a fiscal deficit ceiling of three per cent including grants, is to be approved by the EAC Heads of State Summit in November. Countries must also have a tax to GDP ratio of 25 per cent, foreign reserves worth four-and-a-half months of imports and an inflation rate ceiling of eight per cent. 

READ: EAC single currency in sight as negotiators agree on key protocol

Last week’s Council meeting of finance and economic affairs ministers of Burundi, Kenya, Tanzania and Uganda that signed off on the convergence criteria paves the way for the bloc’s highest organ to flag off the 10-year implementation period that will culminate in the launching of a single currency for the EAC.

“We’ve agreed on the convergence criteria before we move into implementation…all those benchmarks you are talking about will be met. These thresholds are not imported but picked from EAC partner states. And we have failed on none of them,” said Maria Kiwanuka, Uganda’s Finance Minister.

Kenya’s Cabinet Secretary for National Treasury Henry Rotich said that the Monetary Union — the third step in EAC’s integration agenda after the Customs Union (2005) and Common Market (2010) — whose negotiations started in 2011, is achievable, provided that partner states keep within the set benchmarks.

Benchmarks

“Each country will work towards those convergence benchmarks... so that we are ready by the time of launch. In terms of economic performance, all economies are doing well; our macros are sounder than most countries.’ So we are optimistic,” said Mr Rotich. 

The EAC finance ministers also agreed on a harmonised East Africa trade, monetary and financial statistics framework, to inform the bloc’s planning functions, according to Tanzania Finance Minister William Mgimwa.

This emerges from earlier submissions by the sectoral co-ordination committee, comprising technical staff from the member states, which recommended that by December this year, there should be a full time expert on secondment terms on a rotational basis for two years.

A report of the technical staff spells out the key areas of statistics that the expert should harmonise. These are monetary and financial statistics, financial soundness indicators, balance of payments, consumer price indices, national accounts statistics, demography and agriculture statistics.

Further harmonisation is around partner states’ fiscal years, with the Kampala meeting recommending that Burundi realign its financial calendar in accordance with those of other EAC countries, which runs from July 1 to June of the following year. Burundi follows a calendar year.

The budget processes across the EAC are, however, still in discord, two months ahead of the launch of the implementation period of the monetary union. While Tanzania and Kenya, for instance, have already reviewed their budget cycles to start from July 1 of every year, Uganda has only just introduced a Finance Bill in parliament to achieve the same purpose.

Equally, there remains deep-seated misgivings about the whole integration agenda, especially since Kenya, Uganda and Rwanda have lately gathered momentum on key infrastructure projects of the region, and seemingly left behind Tanzania and Burundi.

But despite these hitches, the signing off of the convergence criteria in Kampala means the monetary union wheel is clearly in motion.