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East Africa: Food Prices Worry EAC Bankers
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New Vision (Kampala)
6 May 2008
Posted to the web 7 May 2008
Sylvia Juuko
Kampala
CENTRAL bank governors of the five East African Community (EAC) member states have warned that skyrocketing commodity prices and inflationary pressures posed a risk to macro-economic stability in the region.
The governors noted that while progress had been made to keep inflation relatively stable, developments in the global economy like the turmoil in the financial markets would pose a challenge.
"The EAC countries registered strong foreign exchange inflows, which coupled with the weakening dollar led to strong appreciation of local currencies thereby complicating monetary policy and export sector competitiveness," the governors said in a communiqué issued after the 11th meeting of the monetary affairs committee at the Commonwealth Resort, Munyonyo last week.
The meeting brought together five central bank governors from Uganda, Kenya, Tanzania, Burundi and Rwanda to review the progress towards fast-tracking the ambitious monetary union by 2012.
The governors said the world oil price hike and growing influence of China and India would also pose a challenge in management of their economies.
"While we could not insulate the EAC economies from the global economic developments, they could weather the storms by effective implementation of financial sector risk management, entrenching sound monetary and fiscal policies and seeking a functioning financial system among other interventions," the communiqué added.
The governors commended the Kenyan political leadership that resolved the post-election crisis that posed a major threat to the regional economies.
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The central bank bosses hinted for a durable monetary union hinged on a high degree of sustainable macro-economic convergence especially in areas of price stability, sound fiscal and monetary policies and exchange rate stability.
Food price inflation may be one of the most serious problems facing the world, but one that monetary policy has little power to tackle.
With the price of food rising by more than 40% a year, the issue was high on the agenda at meetings forworld central bankers at the Bank for International Settlements in Switzerland which began on Sunday.
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