EAC member states are set to start discussions on revising the timelines for the start of the single currency regime, after realising that it would be difficult to set up the necessary institutions and achieve the set macroeconomic benchmarks with only five years to the 2024 deadline.
Bank of Uganda Governor. Emmanuel Tumusiime-Mutebile said several challenges stand in the way of fully implementing the East African Monetary Union Protocol.
He said it is important for the region to assess the practicability of the current timelines, which require member countries to comply with macroeconomic convergence criteria at least three years before the single currency regime starts.
He said there has been significant progress towards the EAMU Protocol in terms of harmonisation of monetary policy frameworks, exchange rate policies, rules and practices governing bank supervision, and payment systems.
“However, there have been delays in realising targets set out in the EAMU roadmap and there are several challenges that could further impede the full implementation of EAMU Protocol. It is therefore imperative that we assess the realism of the timelines,” Mr Tumusiime-Mutebile said at the 23rd Ordinary Meeting of the EAC Monetary Affairs Committee in Kigali last month.
The Protocol for the establishment of the EAMU was signed in November 2013 by the EAC member states, setting up a 10-year roadmap for attaining a single currency regime in 2024.
This means the EAC member countries now have five years to implement a single currency regime and two years to comply with key macro- economic convergence criteria on inflation, fiscal deficits, forex reserves and public debt.
Under the Protocol, partner states agreed on the creation of key institutions and for member states to attain and maintain a set of four primary convergency criteria for at least three years before joining the bloc’s planned single currency.
These are the East African Financial Services Commission, East African Monetary Institute, East African Statistics Bureau and the East African Surveillance, Compliance and Enforcement Commission.
The EAC countries are expected to attain headline inflation of a maximum of eight per cent, a fiscal deficit, including grants, of not more than three per cent of GDP, public debt-to-GDP ratio of 50 per cent, and forex reserves of at least 4.5 months of import cover. Every member country must meet these requirements for at least three years before the official launch.
EAC Director of Monetary and Fiscal Affairs Pantaleo Joseph Kessy said compliance has been slower than expected.