East African Community Headquarters, Arusha, Tanzania; 17 January 2011: Experts from the EAC Partner States today embarked on a four-day meeting in Arusha that sets the stage for negotiations for the East African Monetary Union.
The EAC Secretary General Amb. Juma V. Mwapachu opened the preparatory meeting of the High Level Task Force (HLTF) that will negotiate the Protocol to establish the Monetary Union by emphasizing the importance of the next stage of the integration process to the region’s economy.
“The introduction of a common currency will provide a stronger and more solid basis for investment and economic growth,” Amb. Mwapachu remarked, adding, “Certainly, for an efficient and effective common market to operate, a monetary union, and not simply the free movement of capital, is essential”.
The EAC Secretary General noted that the Partner States need to integrate their economies more deeply for the region to achieve the Monetary Union, the third pillar of the integration agenda after the Customs Union and Common Market.
Amb. Mwapachu also observed that a monetary union would help eliminate price instability and exchange rate volatility, which he said would translate into a competitive business environment that spurs investment flows and growth.
Heads of country delegations appointed to the HLTF were unanimous in voicing their commitment to steering the negotiations to a successful conclusion. At this week’s meeting the HLTF is expected to among others, consider and adopt the methodology of work, review and refine the draft roadmap towards the EAMU, and lastly agree on the calendar of activities for the negotiations process. Negotiations for the Protocol are slated to commence in March this year.
The HLTF comprises senior officials from the Partner States Ministries of Finance, Planning and Economic Development, East African Community Affairs, as well as Central Banks, Capital Markets Authorities, Insurance and Pensions Regulatory Agencies, and National Statistics Offices.
Notes to Editors
• The process for the establishment of the East African Monetary Union is underpinned by Articles 5 and 82 of the EAC Treaty where, among others, the Partner States undertake to establish a Monetary Union and to co-operate in monetary and fiscal matters.
• The primary rationale for a monetary union is to reduce the costs and risks of transacting business across the national boundaries of those countries which comprise the monetary union.
• The East African Monetary Union by granting the region a single currency would remove the costs of having to transact in different currencies and the risk of adverse exchange rate movements for trade and travelers within East Africa.
• It is envisaged that the EAMU will deepen the integration of East African economies and, in doing so, enhance the benefits which can be derived from the East African Community Common Market.
• The EAC Council of Ministers at its 20th Meeting in March 2010, among others; adopted a model comprehensive Protocol on East African Monetary Union (EAMU) to be negotiated and directed that a High Level Task Force be established urgently to negotiate the EAMU Protocol.
• At their Summit in 2007, the Heads of State of the EAC Partner States decided to fast track the achievement of monetary union by 2012. Following the recommendations from the Governors of the Central Banks, the Council directed the Secretariat to source for a consultant to undertake a comprehensive study on the EAC Monetary Union. After an internationally competitive bidding process, the consultancy was awarded to the European Central Bank (ECB).
Study on the Establishment of a Monetary Union among EAC Partner States
In order to attain the milestone of the EAMU as spelt out in Article 5(2) of the Treaty for the Establishment of the East African Community, the Council of Ministers sanctioned a study that was undertaken by the European Central Bank (ECB) and the EAC whose major objectives included:
(i) Taking stock of the state of preparedness for EAMU;
(ii) Proposing the institutional framework and structure of EAMU, East African Central Bank (EACB) and East African Monetary Institute (EAMI) as precursor to EACB;
(iii) Designing a draft model Protocol to serve as a basis for negotiations; and,
(iv) Proposing a mechanism for macroeconomic convergence surveillance.
The study involved consultations with the stakeholders in the Partner States that was followed by a regional validation workshop held 18-20 January 2010 in Kampala, Uganda. The final report that took into consideration all stakeholders views was adopted with its annexes including the model EAMU Protocol by the joint meeting of the Ministers responsible for Finance, Economic Planning and EAC Affairs held on 2 March 2010 in Arusha.
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