In a new move to strengthen economic integration in East Africa, Kenya, Tanzania, Uganda, Rwanda and Burundi, on Saturday signed the first draft of a monetary union treaty which would see the region share the same currency, policies and central bank, within 10 years.
The plan by the East African Community (EAC) which boasts of about 135 million people with newly discovered oil and gas reserves, is also meant to draw foreign investment and wean EAC countries off external aid, a report by BusinessDay stated.
“The promise of economic development and prosperity hinges on our integration,” said Uhuru Kenyatta, Kenya’s President.
He added: “Businesses will find more freedom to trade and invest more widely, and foreign investors will find additional, irresistible reasons to pitch tent in our region.”
By signing the monetary union protocol, the presidents ceded the powers of the domestic central banks to the yet to be created East African Community Central Bank, whose role will be to formulate monetary policies for member states.
However, nations will maintain their respective central banks.
Analysts also argue that according to the protocol, domestic central banks will cease to directly finance the government expenditures of member states, a move that transfers the mantle onto one Central Bank of East African Community.
The protocol also calls for the creation of the EAC monetary institution that experts say would be playing the role of harmonising the financial sector in the region and the exchange rate mechanism.
“The elimination of exchange rate differential between participating members leads to greater competition, lower prices, promotes regional and international trade and investment due to greater price transparency and hence economic unification,” New Vision quoted former director of capital markets at Bank of Uganda, Stephen Kaboyo, as saying.
The East Africa leaders also signed two working documents – the EAC Common Market Protocol and the Customs Union Protocol, that will drive the operations of the Monetary Union Protocol.
