Arusha — THE East African Legislative Assembly (EALA) has approved the EAC Financial Services Commission Bill, 2022, during its Second Meeting of the Fifth Session of the Fourth Assembly.
The crucial bill allows the East African Community to start the process of establishing institutions that will lead towards the realisation of a monetary union and the EAC Common Currency.
It also seeks to establish an institution that will regulate non-banking financial sectors like insurance, pension, capital markets, microfinance and money lending.
The bill is considered to be one of the pillars of regional integration as it will pave the way for establishment of a fully-fledged institution under the East African Community.
The East African Monetary Union (EAMU) is an important stage in the process of East African Community (EAC) Regional Integration. The EAMU Protocol was adopted in accordance with the EAC Treaty and signed on 30th November 2013; it lays groundwork for a monetary union within 10 years and allows the EAC Partner States to progressively converge their currencies into a single currency in the Community.
In the run-up to achieving a single currency, the EAC Partner States aim to harmonise monetary and fiscal policies; harmonise financial, payment and settlement systems; harmonise financial accounting and reporting practices; harmonise policies and standards on statistical information; and, establish an East African Central Bank.
The East African Monetary Union is the third pillar of the six-member bloc's integration process before it ultimately transforms into a political federation.
The protocol provides for a set of four primary convergence criteria which must be attained and maintained by each EAC partner state, for at least three years, before joining the monetary union.
The four are: a ceiling on headline inflation of 8 per cent; reserve cover of 4.5 months of import; a ceiling on the overall deficit of 3 per cent of GDP, including grants; and a ceiling on gross public debt of 50 per cent of GDP in net present value terms.
While the region envisages the Monetary Union to be ready by 2024, a source privy to the development expressed worry that it could further be pushed to 2031, following a failure if implementing its roadmap.
