6 June 2014

Kenya: Fix Common Market Before the Currency


ON Wednesday a former German president warned the East African Community not to rush into a common currency union.

Horst Kohler, heading a German trade delegation, told Kenyan leaders that Europe is only just recovering from creating a single currency without common strong fiscal and monetary policies.

The European Union was almost destroyed by this mismatch. The weaker economies used the strength of the euro to borrow heavily and go on a spending spree.

Eventually there was crash, leading to mass unemployment and huge economic stresses throughout Europe.

East Africa runs the same risk. If one country decides to spend extravagantly using the common currency, all the other countries would eventually have to bail it out.

EAC Secretary General Richard Sezibera insisted that the EAC will have common fiscal policies in place in ten years.

But is that truly feasible? In 14 years after the EAC was founded, there is still no open market. Multiple non-tariff barriers to regional trade remain. Borders have not been removed. Work permits have not been abolished for neighbouring nationals.

The EAC should forget about creating a common currency. Instead it should concentrate on making the common market a reality, something of huge benefit that is way behind schedule.

Quote of the day: "Tyranny and anarchy are never far apart. " - British philosopher Jeremy Bentham died on June 6, 1832.

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