EAC is not yet ready for common currency

[rosemarie]

The East African Community (EAC) is not ready for a common currency, a University of Oxford economist has told delegates at the ongoing monetary union summit in Arusha.
Paul Collier, director of the Centre for the Study of African Economies at Oxford, said that economic imbalances among EAC member countries could create regional instability similar to the current crisis facing the eurozone.

The Arusha summit is a precursor to the signing of an EAC monetary union charter later this year, which is expected to pave the way for a single currency for member states.

"Don't do what Europe did, you need an independent voice saying let's be careful," Prof Collier told delegates who included regional finance ministers and central bank governors.

http://www.businessdailyafrica.com/...common+currency+/-/539552/1354962/-/1b4wv5/-/

A major pre-requisite for the formation of a monetary union is the establishment of a regional central bank and guaranteeing the independence of central banks of member states.

Prof Collier said that the eurozone experience had shown that it is difficult to enforce spending limits among members of a monetary union such as the one proposed by the EAC.

Some European Union countries reneged on agreements to maintain low budget deficits since there were no rules for enforcing fiscal discipline.

Heavily indebted countries such as Greece, Italy, Portugal, Spain and Ireland have deepened the eurozone crisis, raising fears among lenders that their weak economic growth cannot sustain repayments.

"If you are not confident of the structures for enforcing national budgets then you are not ready for a monetary union," said Prof Collier.

The economies of EAC member countries are also too divergent to support a common currency, according to the widely published economist.
​

 

[Rufiji]

The East African Community (EAC) is not ready for a common currency, a University of Oxford economist has told delegates at the ongoing monetary union summit in Arusha.

Paul Collier, director of the Centre for the Study of African Economies at Oxford, said that economic imbalances among EAC member countries could create regional instability similar to the current crisis facing the eurozone.

The Arusha summit is a precursor to the signing of an EAC monetary union charter later this year, which is expected to pave the way for a single currency for member states.

"Don't do what Europe did, you need an independent voice saying let's be careful," Prof Collier told delegates who included regional finance ministers and central bank governors.

A major pre-requisite for the formation of a monetary union is the establishment of a regional central bank and guaranteeing the independence of central banks of member states.

Prof Collier said that the eurozone experience had shown that it is difficult to enforce spending limits among members of a monetary union such as the one proposed by the EAC.

Some European Union countries reneged on agreements to maintain low budget deficits since there were no rules for enforcing fiscal discipline.

Heavily indebted countries such as Greece, Italy, Portugal, Spain and Ireland have deepened the eurozone crisis, raising fears among lenders that their weak economic growth cannot sustain repayments.

"If you are not confident of the structures for enforcing national budgets then you are not ready for a monetary union," said Prof Collier.

The economies of EAC member countries are also too divergent to support a common currency, according to the widely published economist.

South Sudan is entirely dependent on oil, Uganda and Tanzania have recently discovered commercially viable oil and gas reserves respectively while Kenya and Rwanda are less reliant on natural resources.

This potentially makes it more difficult for the member countries to have similar fiscal objectives, as resource rich countries have more spending power than agricultural and service based economies.

The EAC, however, stood to gain from closer trade integration and better infrastructure funded jointly by the member countries, said Prof Collier. Permanent secretary in the Ministry of Finance, Joseph Kinyua, said that a strong fiscal policy of the kind that would support a monetary union would require politicians to "bite the bullet" and guarantee independence of institutions such as the Central Bank.

He, however said that it is important for the EAC to sign the monetary union protocol this year even as negotiations for policy rules for the eventual single currency continue.

"What we will be signing is a framework for building the union but it will not mean that we will have a single currency by the end of this year," said Mr Kinyua.

The EAC was revived 12 years ago following collapse of the first union between Kenya, Uganda and Tanzania in 1977.

Rwanda and Burundi have joined the expanded EAC with an estimated population of 130 million, while an application from South Sudan is under consideration.

My take:

Thanks to Prof Collier for schooling the so called EAC's economists. What you have narrated is not new at all, we have been telling these people the same thing years for years now but to no avail. They have ridiculed and worse of all label as xenophobic. Hopefully, because of their low-self esteem,they will listen to you since you are a Oxford scholar and a muzungu.

Source: http://www.businessdailyafrica.com/...39552/1354962/-/item/1/-/6kptgoz/-/index.html

 

[sanjo]

When everything is entirely dependent on politicians to decide then expect corresponding unsustainable booms and heavy losses.

 

[The Quonquerer]

that is no new

 

[Kabaridi]

I thought it was an an Economist from the Local schools, Kumbe its an oxford professor. You guys cannot do anything with your own consciuos or you do not trust yourselves.

The articles says that countries rich natural resources have huge spending power. But on the ground, there is very little indication of how such spending power affects all the people across the nations. This article is seeking self-exaltation and acts as a cover not to expose the challenges of corruption ridden authorities that have decayed to the extent of being bed-ridden

 

[The Finest]

When we talk of a common market it is a very wide area. Our history will always judge us if we want to be careful when we make decisions based on political will while professionalism has been ignored. When you hear that Europe has developed and can cooperate it was because of well educated men and women whom their work were accepted and put unto practice

I am talking valuing research products that are done based on our local context

 

[Mdondoaji]

Nilishawahi kulisema jambo hili miaka miwili nyuma na narudi tena We should unite in things we have common interest. Tanzania should not allow muungano katika sekta ya ardhi, uchumi, sarafu na ulinzi hilo siliungi mkono.

Haingii akilini wakati Rwanda and Tanzania are growing by 7%-8% tukaungane na nchi zinazogrow 4%-5% or less huko ni kurudishana nyuma.

Vile vile Uganda and Tanzania have discovered commercial viable oil and gas reserves which are going to drive the economy even faster but we are going to be doomed in EAC once we unite in fiscal and monetary policies. Worse enough the lesson from European Debt crisis is a free lecture for Tanzanians.

Britain inachekelea pembeni lakini Germany na France are suffering. Tanzania ijiunge na EAC for matters of common interests vyenginevyo wakiwa hawataki wachukue EAC waende nayo Nairobi hatutaki.....

 

[The Finest]

On a monetary union and single currency i would like the Tanzanian Government to make a detailed research why some EU countries don't use EURO in their countries. These countries are namely Denmark, Sweden and UK they are all full members of EU but use their own currencies in their countries, probably there is a disadvantage of having a single currency?

 

[Kabaridi]

If you are judging by history, then you should also make desicions based on practicality, we have Angola at Sadc with a an outburst of economic growth but there is very little growth on the side of their other counterparts, like malawi and DRC. So what you are suffering now will be the same effect that will make malawi, DRC and moqambique to complain and seek alternatives.

 

[Hardwood]

Just a mundane idea!!! It is sad to immagine that the Oxford Professor could give comments aimed at*splitting EAC into slices instead of emphasizing unification of EAC states.

There are so many loopholes in his comments. He has failed to comment as to why Kenya and Rwanda(Agricultural and service based economies) are the most prosperous economies in EAC while resource rich economies like Tanzania and Uganda are not as prosperous!*

Besides, EAC states are not highly divergent in terms of economic development compared to states comprising European Union. Why was it possible to unite Europe, despite the existing economic disparity between*European*nations, but it is difficult to unite EAC states, despite low level of economic disparity between EAC states?

It is hard to believe that the Oxford Professor came with a clean mind to advise EAC states. There must be a hidden agenda.*

 

[Kabaridi]

Just a mundane idea!!! It is sad to immagine that the Oxford Professor could give comments aimed at*splitting EAC into slices instead of emphasizing unification of EAC states.

There are so many loopholes in his comments. He has failed to comment as to why Kenya and Rwanda(Agricultural and service based economies) are the most prosperous economies in EAC while resource rich economies like Tanzania and Uganda are not as prosperous!*

Besides, EAC states are not highly divergent in terms of economic development compared to states comprising European Union. Why was it possible to unite Europe, despite the existing economic disparity between*European*nations, but it is difficult to unite EAC states, despite low level of economic disparity between EAC states?

It is hard to believe that the Oxford Professor came with a clean mind to advise EAC states. There must be a hidden agenda.*

And to add to this, no westerner is of the Idea that African economies, however small, can spur to great lengths. I cannot see the logic on "differing fiscal objectives". If you read the history of western countries, all sprung up despite the difference in environments and the geopolitics of the regions. As much as countries with natural resources like gas oil and other minerals like gold may be enviable, I still believe agricultural based economies are still a mirror to promote economic stability. It is funny the same oxford scholar, knowing the history of their country, may not reveal to the Arusha conference how Agrarian/neolithic revolution gave rise to increase in agricultural productivity in Great Britain which helped drive the Industrial Revolution. A proper framework can be dug and by africans who are running the economy, not becasue a muzungu in Havard said!!,

 

[Wacha]

Wakenya wanachekesha sana, hivi ukiwa kuwadi wa mzungu miaka yote kuna wakati unaweza kubadilika?

 

[Kabaridi]

Hivi kama hamtaki walio kuwadi wa wazungu, mbona munasikiliza ushauri wa wazungu??

 

[Geza Ulole]

Now this is the kind of discussion i want and not biased report from lousy Journalists at Nationmedia that whine and claim on unfair treatment by Tanzania everyday while blind on their doings...

 

[Geza Ulole]

Just a mundane idea!!! It is sad to immagine that the Oxford Professor could give comments aimed at*splitting EAC into slices instead of emphasizing unification of EAC states.

There are so many loopholes in his comments. He has failed to comment as to why Kenya and Rwanda(Agricultural and service based economies) are the most prosperous economies in EAC while resource rich economies like Tanzania and Uganda are not as prosperous!*

Besides, EAC states are not highly divergent in terms of economic development compared to states comprising European Union. Why was it possible to unite Europe, despite the existing economic disparity between*European*nations, but it is difficult to unite EAC states, despite low level of economic disparity between EAC states?

It is hard to believe that the Oxford Professor came with a clean mind to advise EAC states. There must be a hidden agenda.*

Kenya most prosperous? u must be joking...:lol: Dude, ur economy grows slowest and inflation is highest in the block ! Don't compare urself with Rwanda

 

[Geza Ulole]

Oxford don: Politics spells doom for EA integration

Monday, 27 February 2012 22:14

By Zephania Ubwani The Citizen Bureau Chief Arusha. The East African Community bloc must do away with politically driven measures if the sought after economic integration is to succeed, an expert cautioned here yesterday.He called for more efforts to improve transport infrastructure by seeking private capital to build roads and upgrade the ageing railway networks. Prof Paul Collier from the Oxford University in England told a joint conference of the EAC and the International Monetary Fund (IMF) that the region needed more disciplined structures to push ahead the integration process. The call comes at a time when the region is in the process of strengthening the common market and seeking to introduce monetary union.The expert cited the common external tariffs (CET) charged on goods imported into the region as being too high and the ‘sensitive list' of goods exempted from the tariffs which he believes has been driven by politicians. He said undue political interference could at times be a bottleneck in the way of the smooth flow of investments and conducting business in the region. The professor further argued that it was the politicians who dictated on the ‘sensitive list' of goods to be imported without tariffs. "East Africa needs a coherence in trade. Politics can at times be a burden to economic integration," he told a high profile meeting attended by senior representatives from development partners, ministers for finance from the East African partner states, central bank governors and others. On infrastructure, the economics don agreed that many sub-Saharan African countries avoided investing in infrastructure development because of the high costs and risks involved but urged them to opt for appropriate technologies. His remarks were echoed by the permanent secretary in the Kenya ministry of Finance Mr Joseph Kinyua, who said that without modern infrastructure, there wouldn't be effective and efficient movement of goods and people across the region. He specifically mentioned the railway transport, which, he said, was critical in order to handle heavy cargo and, therefore, lessens the burden on the expensive roads. The deputy-managing director of IMF, Mr Naoyuki Shinohara, said although foreign direct investment (FDI) into EAC has more than doubled to $1.7 billion in the past one decade, poverty remains high. He said the global economic problems such as the eurozone crisis, rising oil prices and the risk of softening commodity markets would not spare the region as they may lead to widening trade deficits. He noted that capital flows were very sensitive to global risks, and added: "Over the medium term, fiscal austerity in Europe may also lead to declining donor funding for the EAC region." For his part, the EAC secretary general Dr Richard Sezibera, said removal of restrictions on capital inflows should serve as a catalyst for capital market development and that provision of long term and risk capital was most needed to spur economic development in the region. "At the EAC level, there are definitive ongoing programmes geared towards the promotion of a regional capital markets regime and institutions," he pointed out. Add this page to your favorite Social Bookmarking websites

Last Updated on Tuesday, 28 February 2012 00:39

More coverage...
Oxford don: Politics spells doom for EA integration

 

[meningitis]

EAC ni upuuzi wa wanasiasa tu!hebu waacheni wananchi wa eac waingiliane bila kuwawekea protokali zisizo za msingi.

 

[Kabaridi]

Kenya most prosperous? u must be joking...:lol: Dude, ur economy grows slowest and inflation is highest in the block ! Don't compare urself with Rwanda

My friend when one says prosperous we are talking about size of an economy & not growth rate. The two you seem to conjoin I do not know why.

 

[Geza Ulole]

My friend when one says prosperous we are talking about size of an economy & not growth rate. The two you seem to conjoin I do not know why.

so what makes u prosperous if u have a GDP of US$ 31 bio. and 45.9% of ur people (WB data) living under a poverty line over a country that has US$ 23 bio. and having 37% of its people under a poverty line? going out of ur mind or bragging is at work? :lol:

 

[kshaka]

so what makes u prosperous if u have a GDP of US$ 31 bio. and 45.9% of ur people (WB data) living under a poverty line over a country that has US$ 23 bio. and having 37% of its people under a poverty line? going out of ur mind or bragging is at work? :lol:

http://www.afdb.org/fileadmin/uploa... of the Pyramid_The Middle of the Pyramid.pdf

Proportion of people living under $1.25 per day in East Africa in 2010

Tanzania - 82.4%
Burundi - 81.32%
Rwanda - 74.43%
Uganda - 51.53%
Kenya - 19.72%

:A S-coffee: