13 May 2019

East Africa: EAC Stalls On Reforms to Create Single Currency

East African governments have up to September 30 to conclude key financial sector reforms spearheaded by the World Bank to lay the groundwork for a single currency regime by 2023.

The agreed implementation period for the eight-year EAC Financial Sector Development and Regionalisation Project (FSDRP) which was launched in 2011 is coming to a close on September 30. But implementation of the project -- designed to foster regional integration and allow EA economies to achieve a monetary union -- is lagging behind, largely due to lack of political will among member countries.

The project is funded by the World Bank through a grant of $26 million.

The reforms include linking regional stockmarkets electronically to operate as a single market, development of a regional bond market, interoperability of retail payments, harmonisation of financial laws and regulations, scaling up of financial inclusion and strengthening of market participants through training.

However, implementation of a joint stockmarket has been delayed since 2015 and effective operationalisation of a unified regional bourse is a key pillar of the entire project.

"There have been many variables that have delayed the implementation of the regional capital markets infrastructure project, but some of them are not within our control," said Geoffrey Odundo, chief executive of the Nairobi Securities Exchange.

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By last year, the cost of the project had risen by an additional $1.8 million due to delays.

The Pakistan-based Infotech Private Ltd was contracted to provide software linking the trading platforms of the Nairobi Securities Exchange, Uganda Securities Ex-change, Dar es Salaam Securities Exchange and Rwanda Stock Exchange to enable them to run as a single market in real time.

But the vendor also withdrew its services in November 2016 over non-payment of $777,649.

Last year, the EAC Council of Ministers said negotiations were still ongoing be-tween the EAC Secretariat, Infotech and the partner states with a view to reaching an agreement on how to finalise the project by September last year.

However, according to a report by the Kenya Capital Markets Authority released last week, no progress has been made so far in ensuring that this project goes live.

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