The four laggards in ratifying the East African Monetary Union Protocol are pushing their parliaments to endorse the pact within two months.
Uganda EAC Affairs Minister Shem Bagiene said the protocol has already been approved by the Cabinets of Uganda, Kenya, Rwanda and Burundi, setting the region on course towards a common currency.
Ministers responsible for EAC affairs have agreed to have the pact adopted before the next Council of Ministers meeting in November.
“I believe we shall meet the deadlines set for us because, unlike other protocols that are signed by ministers of foreign affairs, this one was signed by President Yoweri Museveni; so there is no room for changing its contents,” Mr Bagiene said.
Mr Bagiene added that he would meet Finance Minister Maria Kiwanuka this week to agree on when the protocol would be presented to parliament.
The date of the ministers’ meeting has not been set but it will be followed by a Heads of State Summit where the presidents of the member states are expected to fast-track the integration of financial systems in the region.
In Kenya, the Parliamentary Regional Integration Committee is discussing the protocol after receiving it from the executive.
Set for parliament
“The protocol is being processed by the Integration Committee,” Finance, Trade and Planning Committee chairman Benjamin Lang’at told The EastAfrican. “We expect it to be brought to the House when parliament comes from recess next month.
“Parliament is ready to work overtime to meet any deadlines.”
Jean Rigi, the Permanent Secretary in the Ministry of EAC Affairs in Burundi, said the country’s Cabinet had approved the ratification and that the protocol was due for consideration by parliament.
Zeno Mutimura, the chairman of the Foreign Affairs Committee in the Rwandan parliament, said the Senate had approved the protocol, which is now awaiting to be published in the official gazette. The Lower House of parliament had passed the protocol in June.
The Heads of State signed the protocol on the establishment of the EAMU in November last year and directed that the partner states ratify it by July this year.
Mr Bagiene said that the Council of Ministers agreed in a meeting last month that the protocol should be ratified by the partner states before they next meet, in November.
Tanzania has signed, ratified and deposited the instruments of ratification of the protocol with the EAC secretary-general.
Tanzanian Deputy East African Co-operation Minister Dr Abdallah Saadalah said drafting was under way of Bills for establishment of the four institutions to implement the protocol — the East African Monetary Institute; the East African Statistics Bureau; the East African Surveillance, Compliance and Enforcement Commission; and the East African Financial Services Commission.
According to the protocol’s timelines, the laws are supposed to be signed by November next year.
The single currency is the third pillar of the EAC integration after the Customs Union and the Common Market, which have paid off through improved turnaround for movement of cargo from Mombasa to Kampala from 18 to four days and from Mombasa to Kigali from 21 days to six days.
Pilot projects along the Central Corridor, Dr Saadalah said, had raised hopes that cargo from Dar es Salaam can reach Kigali and Bujumbura in three to four days, from more than 21 days.
The November Summit will also consider proposals for drafting an EAC Constitution in readiness for the final pillar, which is a political federation.
“Other activities towards laying the foundation for the political federation continue being implemented,” Dr Saadalah said.
“They include the programmes under peace and security, foreign policy co-ordination, good governance and strengthening of electoral processes.”
In the drive towards a common currency by 2024, the East African Payment System has been established to facilitate cross-border transactions and bolster intra-regional trade without requiring traders to convert from one national currency to another. The payment system should be harmonised by 2018.
EAC member states will also harmonise monetary and fiscal policies and establish a common central bank. As a first to achieving the goal, Kenya, Uganda, Tanzania and Rwanda present their budgets simultaneously every June.
The states have also set fiscal and monetary convergence targets of headline inflation below eight per cent, fiscal deficit of three per cent, gross public debt below 50 per cent and foreign reserve cover equivalent of 4.5 months of domestic import. These should be achieved by 2021.
“The regional monetary union will only hold when all the member states are able to respect and strictly observe the convergence criteria,” IMF president Christine Lagarde warned in January while on a visit to Nairobi.
She said monetary union organs such as the proposed East African Central Bank should have powers to supervise national central banks in order to ensure the targets are kept.
Foreign exchange reserves
Lack of such powers by the European Central Bank saw Portugal, Italy, Greece and Spain exceed sustainable borrowing levels, plunging the Eurozone into a debt crisis.
Under the EAC protocol, central banks of member states will be required to deposit foreign exchange reserves with the EACB so as to stabilise the common currency.
These will comprise gold and foreign currencies that each state holds as at the time of launching the monetary union — excluding East African currencies.
International Monetary Fund reserves and special drawing rights will also qualify as foreign-exchange reserves.
Once the protocol is effected, all foreign exchange transactions by the EAC governments will be carried out through the EACB or the relevant national central banks within the target set out in the region’s common monetary and exchange rate policy.