2 January 2012

East Africa: Regional Monetary Union in 2012?

Photo: Wambi Michael/IPS
Ugandan: Vehicles loaded with goods.

One of the most anticipated event in the East African calender this year is the establishment of the Monetary Union. Following the establishment of the EAC Customs Union in 2005 and a Common Market in January 2010, Monetary Union has been slated as the next major step in the integration process.

The monetary integration will see the member countries co-operate in economic and fiscal matters aimed at reducing the costs and risks of doing business across the boundaries. By embracing a single currency, EAC partner states would also remove the costs of having to transact in different currencies and the risk of adverse exchange rate movements for traders and travelers.

The integration process has received both support and criticism from different quarters. Though the importance of a monetary union has not been put into much question, it's the timing and the process has aroused much debate. Some critics say the process is being unnecessarily speeded-up which may bring fundamental problems in the future.

This comes as the European Union, which EAC has been looking up to, suffers major challenges with its Euro. "The problems in the Euro-Zone are informing how the process towards our integration is being carried out," assured David Nalo , Permanent Secretary in the Ministry of EAC.

Some countries are also seen to be developing cold feet for fear of more economically strong states. Issues have also been raised on how applicable the Monetary Union will be, given that the preceding agreements of the Customs union and Common Market are yet to be fully implemented. Despite the controversy, the region heads of state have strictly maintained that the Monetary Union should be in place by end 2012, which has seen technical experts hard at work to finalise negotiations.

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