East Africa Community Common currency: The Greek way?

EAC appeals for support to set up monetary union

The East African Community has said it will be looking to Britain for support as it embarks on the next stage of forming a single monetary bloc.

The remarks were made yesterday by the EAC Secretary General, Ambassador Juma Mwapachu, during talks with the UK High Commissioner in Tanzania, Diane Corner and the South African High Commissioner to Tanzania Henry Chiliza who have been named representatives of their countries in the regional bloc.

A preparatory meeting of the taskforce to negotiate the Protocol for the establishment of the East African Monetary Union is due to begin in Arusha this week.

Negotiations for the union are due to kick off in March, this year.

Britain is one of the major development partners of the EAC, channelling support to the bloc mostly through the Department for International Development (DFID) and initiatives such as TradeMark East Africa, due to be launched in Nairobi next month.

Mwapachu commended the UK for its support to the EAC and noted that all partner states enjoy a strong relationship with the European country, which he observed played a significant role in promoting the integration efforts of the three founding members of the EAC, dating back to the previous century.

Corner said that her appointment was an expression of the British Government's faith in the EAC integration project and lauded the bloc for "creating a sense of mutual confidence and stability" among the countries of the region.

The British envoy, who pledged her government's continued support to the EAC, said she believes the bloc has an important role to play in promoting economic development and lifting East Africans out of poverty.

Ambassador Mwapachu said the accreditation of the South African Commissioner to Tanzania and the EAC enhanced links to individual members of the Community and created a more direct channel for obtaining and transmitting information.

"Through this we should create conditions for increasing trade among countries on the continent," he noted, saying South Africa is of the opinion that regional economic structures are central to the regeneration of the African continent's development and its integration.

"We're determined to play a central role in the continental infrastructure development within the context of New Partnership for Africa's development (NEPAD)," he said.

"This provides an opportunity for us to reflect on the importance of regional integration for the development of our continent, as we congratulate the EAC on its achievements to date," he observed.

Mwapachu explained that the global financial crisis has underscored the need for countries to work in close partnership in promoting higher levels of African and regional trade as a key driver for enhanced economic growth and development.

So far, sixteen countries and/or organisations have appointed representatives to the EAC. They include: Brazil, US, Denmark, Turkey, Democratic Republic of Congo, The Netherlands, Japan, Belgium, France, Canada, India, United Nations High Commissioner for Refugees, the European Union, Finland and Sudan.

IPPMEDIA 21.01.11
 
THE five East African community central banks have agreed to re-examine the macroeconomic convergence criteria set as benchmark for member states to qualify for the envisaged monetary union.

Under EAC's monetary union plan slated for release by 2012, member states have to harmonised inflation rates, Gross Domestic Product (GDP) levels, fiscal deficit and foreign reserve covers.

The five central banks which met in Arusha recently said the prior criteria differed in methodological and definitions, defeating the logic behind the sought convergence criteria.

Bank of Tanzania Director for Economic Research and Policy Joe Masawe told the ‘Daily News' that the problem was that each individual central bank had used different methods and definitions to calculate and arrive at the convergence benchmark.

''We agreed to hire a consultant who will work and arrive at more appropriate convergence criteria,'' Dr Masawe said on Thursday.

The EAC Secretariat was given the task of hiring the expert to work on a single methodology and definition that would be accepted by all five central banks.

The consultant expects to deliver the harmonisation criteria as soon as possible to enable member states to meet their target of EAC monetary union in 2012.

''The date set is still viable,'' Dr Masawe said, ''As countries need at least a year of negotiations.''

However, he warned that the date would ‘only be valid' depending on the member states' ability to meet the convergence benchmark criteria during the transit period.

The outcome of the expert report, which is expected soon, will also be used to draw a roadmap and action plan to evaluate if the 2012 deadline is still appropriate time for the EACMU.

Dr Masawe could not rule out the rescheduling of the 2012 deadline, saying: ''We don't want to rush into a monetary union that will not be sustainable''.

The issue of common macroeconomic convergence benchmark arose when Kenya wanted the foreign reserve to be revisited to cover for only four months while Tanzania and Uganda insisted for six-month covers.

Currently, the Tanzania has official foreign reserves amounting to USD 3,778.4 million sufficient for 5.3 month cover, while Kenya has almost similar figure but enough 3.5 months cover.

Tanzania also calculate its reserves by including foreign assets of commercial banks to have a total gross foreign reserves of the banking system of USD 4,761.1 million of last October 2010, which was sufficient to cover for about 7.5 months of projected import of goods and services.
 
Kingine hiki ambacho kinafanywa na viongozi na watendaji wetu bila kufocus mbele.... Sasa kama kuna michakato ya kuweka sarafu moja, kuna haja gani ya kuingia gharama za kutengeneza noti mpya wkt imebaki miaka minne tu? Si yaleyale ya hawa wanaweka lami, baada ya mwezi wanakuja hawa wanachimba hiyo lami kupitisha miundombinu ya maji safi au maji taka? HIVI MIPANGO YETU YA MAENDELEO HAIANGALII MBELE ZAIDI YA MIAKA TATU?
 
A monetary union na mauzauza yake ya common currency na common monetary policy will lead to ruin kwa Tanzania, Burundi na Uganda
 
WB issues USD16m grant for EAC financial reform

By Lusekelo Philemon

The East African Community (EAC) and the World Bank (WB) have signed a grant agreement worth USD 16 million to support a project that will transform the bloc's financial sector.

The agreement to fund the EAC Financial Sector Development and Regionalization Project was initialled by the bloc's secretary-general Juma Mwapachu on behalf of the EAC and WB Country Director for Tanzania, Uganda and Burundi John Murray McIntire.

The signing, which was held on Tuesday, was witnessed by EAC deputy secretary-general in charge of Planning and Infrastructure Alloys Mutabingwa, Community's counsel Wilbert Kaahwa and director of Planning, Tharcisse Kadede.

The project, to be implemented in two phases over a period of nine years, will support EAC efforts towards building a harmonised financial service sector market for the region.

The USD16 million grant, which will cater for the first phase of the project (EAC- FSDRP I), was approved by the WB board on January 31, this year.

According to Mutabingwa, the harmonisation of the financial service sector will play a key role in unlocking some of the benefits of a common market arrangement by removing barriers to the free movement of capital across the region, as provided under the Common Market Protocol.

The project has six components, namely financial inclusion and strengthening market participants; harmonisation of financial laws and regulations; mutual recognition of supervisory agencies; integration of financial market infrastructure; development of a regional bond market, and capacity building.

Phase I of the project commences this year and will end in the first quarter of 2014.

McIntire, commended the EAC for the "excellent work" it is doing, while EAC chief Mwapachu commended the WB for "seeing the importance of this project." He said that a strong regional financial sector is needed to underpin an effective common market in the regional bloc.

He said ordinary East Africans stand to gain from the project by trading on a regional stock exchange, as the FSDRP envisions a single East African Stock Exchange, among other benefits.

He added that, by supporting the development of the regional financial service sector, the project benefits EAC's work towards the establishment of a monetary union and a single currency.

The EAC Secretariat working with the WB prepared the EAC - FSDRP I. The objective of the EAC FSDRP is facilitating the establishment of a single financial market among EAC partner states with a view to making a wide range of financial products and services available to all East Africans at competitive prices.

SOURCE: THE GUARDIAN, 17th February 2011
 
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Dar es Salaam. The East African Community's dream of establishing a single currency by next year might not be realised, after all. Experts are warning that the bloc risks serious consequences by rushing into a monetary union.

Despite the launch in January of the process towards introducing the single currency, East Africans have not been told the whole truth about the project, especially the danger of fast tracking it, which the consultants assigned to draw up the roadmap towards the monetary union, have advised against.

What even the presidents of the five EAC partner states – Kenya, Uganda, Tanzania, Rwanda and Burundi – are not telling their people is that under the prevailing circumstances, it will not be possible to have a common currency by next year.

The consultants have strongly warned that should the monetary union be hurried, it could cost the EAC and the partner states dearly and correcting the mistake won't be easy. Local, regional and international experts concur with the European advisers that the EAC is not ready yet for a monetary union.

The European Central Bank (ECB), which carried out a feasibility study on the proposed union, has hinted that the EAC is not ready for financial integration. The bank's officials were quoted in the just released report of the Economist Intelligence Unit (EIU), as saying that it would not be possible to set up the monetary union.

EAC Secretariat officials declined to comment on the fears that the monetary union might not take off next year, as envisaged. However, a desk officer at the Arusha Secretariat would not disclose what measures would be taken by the regional body in case of a delay in realising the currency union.
"We are aware of the reservations expressed by the ECB. But those are their views. The negotiations are still on schedule," he told The Citizen on Sunday.

The official, who asked not to be named because he is not the community's spokesperson, said the EAC had not yet responded to the ECB's findings.
Efforts to reach the EAC's deputy secretary general (Planning and Infrastructure), Mr Alloys Mutabingwa, who is leading the monetary union negotiations, failed.
For his part, the deputy minister for East African Co-operation, Dr Abdallah Abdallah, The deputy minister for East African Cooperation, Dr Abdallah Abdallah, said a feasibility study was being done on having a common currency and that some issues had not been agreed upon.

"In my view, next year is too soon to have this implemented. Our counterparts accuse us of dragging our feet towards achieving a monetary union, but I believe we should not rush into it."
In its latest Tanzania country report, the influential Economist Intelligence Unit (EIU) says the European Central Bank warned the EAC that the target of having a single currency by next year is unrealistic. The bank, which was consulted because of the success of the euro, said it was impossible to set a timetable for the achievement of a single currency.

"Although the EAC member governments had clearly shown a strong degree of political resolve to form a monetary union, the reality was that in purely economic terms they were not yet ready to do so," the EIU notes in its February report referring to the ECB study.
Contacted by email to explain its pessimism, the ECB directorate of communications declined to comment. However, the bank conceded it was engaged by the EAC Secretariat on June 2, 2009 to advise the bloc on how to better and viably establish a monetary union.

"Please be informed that the European Central Bank (ECB) prefers not to comment on the establishment of an East African Monetary Union. However, in February, last year, ECB experts prepared a report on the topic. The views expressed in the report are those of the authors," the directorate said in its March 30 response also by email.
On January 14, the EAC announced the start of negotiations to create the protocol to establish the monetary union. In late February, the second round of negotiations was held for five days in Bujumbura.

"Although the European Central Bank (ECB) report highlighted that economic convergence between the three countries was currently insufficient to be promising for a currency union, the political commitment was strong, the Economist Intelligence Unit is less convinced of the political commitment," the EIU notes in its report.

"While the governments of the smaller, more open economies such as Uganda and Rwanda may see the political benefits of a common currency and its role in boosting trade, we are less convinced of the Tanzanian government's real commitment to giving up sovereignty over its currency, as required for full monetary union. As such, although it is easy to make commitments such as to accept other East African currencies as payment and to have studies on the way forward, it will be another issue altogether to sign up to full monetary union," it adds.

Doubters of Tanzania's commitment cite the introduction of new currency notes late last year as proof of its lack of interest. Mzumbe University lecturer Honest Ngowi, warning that "too rapid" deeper integration should be avoided, said the introduction of the notes was an indication the region was not ready for the union.
Development consultant Aidan Eyakuze, of Serengeti Advisers Limited, said that in principle, a well-functioning union would mean the EAC having one currency and one monetary authority (central bank).

That, he argued, called for the regional economies to have at least two 'numbers' within a reasonable range of each other. The first is inflation, so that the currencies values are not wildly different from each other when they become one currency and the second is the fiscal deficit (how much each government's budget is in deficit compared to GDP).

According to Dr Iqbal Zaidi, of Princeton University, the transition to a single currency will not be easy but the EAC has the potential to become a leading example of a monetary union in sub-Saharan Africa. He said the union would foster development, stability, and economic growth, but its success would depend on sound fiscal monetary interactions.

"While this presents an opportunity for the countries to create a fully independent regional central bank, achieving more independence at the national level is an important first step," he argued last December in "Moving Toward a Monetary Union and Forecast-Based Monetary Policy in East Africa" report.
 
Lack of specifics here ? When they say EA is not ready they should give us specific reasons!!!!! not just bla bla bla. i dont trust Europeans at all
 
Kuna habari zimeenea kuwa kuna mpango wa jumuia hii kuwa na sarafu ya pamoja,nimekuwa nikijuliza kwanza itaitwaje?Sh,faranga au nini?Ukizingatia nchi za Congo,rwanda na burundi,thamani yake?Je itakuwa ya mtazamo upi wa kifaransa(Congo,Rwanda,Burundi)au Kiingereza?(Kenya,Uganda na Tz)sijui na sidhan kama nitajua karibuni!Labda wewe!
 
Eiyer;Kuna habari zimeenea kuwa kuna mpango wa jumuia hii kuwa na sarafu ya pamoja,nimekuwa nikijuliza kwanza itaitwaje?Sh,faranga au nini?Ukizingatia nchi za Congo,rwanda na burundi,thamani yake?Je itakuwa ya mtazamo upi wa kifaransa(Congo,Rwanda,Burundi)au Kiingereza?(Kenya,Uganda na Tz)sijui na sidhan kama nitajua karibuni!Labda wewe!


Nadhani hakuna umuhimu wa kuharakisha kuwa na One currency kwa hizi nchi ulizozitaja hapo. Ni kwelii kila nchi hapo maendeleo yao kiuchumi ni tofauti, hivyo currencies strength ni tofauti. Kuna ugumu katika nchi husika zinazotumia common currency (mfano:-Euro) katika masuala ya kurekebisha na kusimamia chumi husika. Ndiyo maana tunaona leo Ugiriki wapo matatani katika kuhimarisha uchumi wake kwa kutumia Monetary policy. Haiwezi kufanya devaluation maana Euro ni ya nchi wanachama. Ingewezekana kama wangekuwa na country currency. Kwa hiyo option waliyo nayo ni ya fiscal policies(tax cut, na tighten their expenditure) tu.

Usishangae ndo maana Mwingereza hataki kuiacha Pound yake na kutumia Euro. Sababu mojawapo ni hiyo. Pili, anajuwa pesa yake ni Imara zaidi kutokana na Uchumi wake, hivyo kuiacha na kutumia Euro inaweza kula kwake. Ikiwa na maana hawawezi kujipangia Interest rate zao kama ilivyo kwa sasa.Tatu, nchi husika sinapoteza Utaifa (sovereignty) maana hakuna Tsh Shilling, Kenya Tsh nk.

Kuna faida kwa kuwa na common currency, kama vile punguzo katika Interest rate, mambo ya Hedging katika exchange yatatoweka na hakutokuwa na mambo ya kubadilisha pesa pale Mpakani mwa Tz na Kenya.

Nadhani tuskimbilie hili suala la pesa moja, Wachumi wetu watumiwe kufanya Upembuzi wa kutosha na wananchi pia waulizwe kama wanataka huo mfumo wa pesa moja ili baadaye tusije anza kujilaumu
 
Eiyer said:
Kuna habari zimeenea kuwa kuna mpango wa jumuia hii kuwa na sarafu ya pamoja,nimekuwa nikijuliza kwanza itaitwaje?Sh,faranga au nini?Ukizingatia nchi za Congo,rwanda na burundi,thamani yake?Je itakuwa ya mtazamo upi wa kifaransa(Congo,Rwanda,Burundi)au Kiingereza?(Kenya,Uganda na Tz)sijui na sidhan kama nitajua karibuni!Labda wewe!
Click to expand...

With the rumour that Greece may withdraw from the Euro, I say welldone and Tanzania should think again. What i know about Euro currency was design for Geremany Central Bank assist in the ruling of Europe along with the complicit French. Seems like it is an insidious takeover of Europe, ask yourself why Britain stay out of it?
 
Hili suala la jumuia ya afrika mashariki inabidi tulitazame kwa umakini tusije juta hapo baadae...
 
hapo tutaumia sana, angekuwepo madarakani Rais Edward Lowassa nyundo pekee anaeweza kupambana na Kibaki simba mla watu, japo ni sirias sana, let s just wish they will have mercy on us with the smiley kikwete
 
EAC ni usenge mtupu.wazee wetu wamefanya kazi halafu serikali imewazika hela zao za mafao! Vunja kabisa hii haina tija!
 
Ngo said:
Eiyer;Kuna habari zimeenea kuwa kuna mpango wa jumuia hii kuwa na sarafu ya pamoja,nimekuwa nikijuliza kwanza itaitwaje?Sh,faranga au nini?Ukizingatia nchi za Congo,rwanda na burundi,thamani yake?Je itakuwa ya mtazamo upi wa kifaransa(Congo,Rwanda,Burundi)au Kiingereza?(Kenya,Uganda na Tz)sijui na sidhan kama nitajua karibuni!Labda wewe!


Nadhani hakuna umuhimu wa kuharakisha kuwa na One currency kwa hizi nchi ulizozitaja hapo. Ni kwelii kila nchi hapo maendeleo yao kiuchumi ni tofauti, hivyo currencies strength ni tofauti. Kuna ugumu katika nchi husika zinazotumia common currency (mfano:-Euro) katika masuala ya kurekebisha na kusimamia chumi husika. Ndiyo maana tunaona leo Ugiriki wapo matatani katika kuhimarisha uchumi wake kwa kutumia Monetary policy. Haiwezi kufanya devaluation maana Euro ni ya nchi wanachama. Ingewezekana kama wangekuwa na country currency. Kwa hiyo option waliyo nayo ni ya fiscal policies(tax cut, na tighten their expenditure) tu.

Usishangae ndo maana Mwingereza hataki kuiacha Pound yake na kutumia Euro. Sababu mojawapo ni hiyo. Pili, anajuwa pesa yake ni Imara zaidi kutokana na Uchumi wake, hivyo kuiacha na kutumia Euro inaweza kula kwake. Ikiwa na maana hawawezi kujipangia Interest rate zao kama ilivyo kwa sasa.Tatu, nchi husika sinapoteza Utaifa (sovereignty) maana hakuna Tsh Shilling, Kenya Tsh nk.

Kuna faida kwa kuwa na common currency, kama vile punguzo katika Interest rate, mambo ya Hedging katika exchange yatatoweka na hakutokuwa na mambo ya kubadilisha pesa pale Mpakani mwa Tz na Kenya.

Nadhani tuskimbilie hili suala la pesa moja, Wachumi wetu watumiwe kufanya Upembuzi wa kutosha na wananchi pia waulizwe kama wanataka huo mfumo wa pesa moja ili baadaye tusije anza kujilaumu
Click to expand...

Hapo kwenye red,
Hilo ndio limekuwa la msingi na ndio matamanio ya sisi wananchi wa kaya hizi,
Lakini ninashaka na nafasi yetu katika kusikilizwa, kasi ya watawala wetu ni kubwa sana.
Kwa mujibu wa Mh Sitta waziri wa wizara husika ni kuwa pamoja na hofu yake lakini 2013 mazungumzo yatakamilika.
Pitia Raia Mwema ya tar 1 june 2011 uk 12 na 13
 
The Observer (Kampala)
Moses Talemwa
18 November 2011

As the five-member East African bloc maps out a plan on having a single currency, Tanzania, as usual, remains uncomfortable with the direction the talks are taking.

Tanzania is reluctant to adhere to the same monetary policy, and instead wishes for more room to determine its economic future. During the Uganda leg of the talks that concluded November 9, the Tanzanian delegation led protests on many provisions in the draft background paper that will eventually become the protocol.

​
The fourth round of the East African Monetary Union high-level taskforce meetings, this time held in Entebbe, saw the Tanzanian delegation prodding the delegates to postpone resolutions on several issues, especially those that bestow immense power on a regional Central Bank.

According to Odas Niyonzima, Burundi's Central Bank Director of Research, who chaired the Uganda plenary meetings, the delegates are expected to consult with their respective governments on at least three sticky issues; mainly on whether the states should devolve more power to the union and establish a centralized system or retain some authority on some decisions.

"The delegates need to establish whether their governments want a centralized fiscal policy or a federal style that devolves some powers to each country. They also need to agree on the modalities of how the East African Central Bank operates well acceptable debt levels," Niyonzima said.

However, Niyonzima is emphatic that the delegates need to agree on the crucial aspect of which fiscal policy to adopt as soon as possible as it determines all the other policies. "It is important to sort out the fiscal policy first because it is the heart of everything. Once we have sorted that out then we can work out the monetary policy and agree on how to proceed," he said.

​
Indeed Article 24 of the draft background policy paper proposes that the member states maintain a harmonized monetary and fiscal policy.

"For the proper functioning of the Monetary Union and in order to maintain stability in the monetary and exchange rate policies, the partner states undertake to: pursue prudent national fiscal policies; ensure harmony between monetary and fiscal policies; and strengthen their external positions in order to be consistent with the sustainability of the common exchange rate and the reserve targets in the Community.

Despite Tanzania's cautious approach, there is hope on the horizon after the country's president, Jakaya Kikwete, recently urged EAC partner states to harmonize their tax regimes to ensure the smooth operation of the EAC Customs Union, Monetary Union and Common Market. Kikwete, who addressed a Public Private Dialogue on Harmonization of Domestic Taxes in the EAC in Dar Es-Salaam, November 11, said a harmonized tax system would be good for the region.

"This way we will be able to eliminate tax distortions, which is critical for the smooth functioning of the Customs Union, Common Market, Monetary Union and the whole of the integration process," he said.

​
Kikwete believes a harmonized tax system would not hurt revenues as is feared in some capitals, citing the fact that trade within the region had jumped from $1.85 billion in 2005 to $3.5 billion in 2009. During the Entebbe meeting, there was heated discussions on article 17, which proposes that member states ensure that tax policies are coordinated at a community level, with partner states required to disclose fiscal policies to other partner states.

The article also proposes that uneven tax bases be defined at partner level in order to reduce inequalities. The article wants tax bases that are immovable across the bloc determined at Partner State level, while ensuring that customs are managed at a community level as a single customs territory.

Some of the delegates wanted this resolved by a monetary union Sectoral Council, while others wanted those powers devolved to the partner states. The matter was eventually ceded to a fiscal affairs meeting, which also met in Entebbe and is required to report to the next high-level task force meeting in Kisumu, Kenya next month.

The meeting was also unable to agree on a planned framework for building resilience and managing economic shocks. According to Niyonzima, the delegates agreed to revert back to their states on a proposal to maintain a debt ceiling, beyond which states would need permission to borrow, since this could affect the stability of the region's single currency.

However, the meeting ultimately resolved to urge the partner states to cede more sovereign powers to the centre to resolve some of these headaches. Drawing from the experience of Europe's current debt troubles, Edith Mwanje, Permanent Secretary at the ministry of East African Affairs, said the centre needs more power.

"Given the experience of the Euro zone, you will realise the need for integration of partner states' fiscal policies to support the monetary policy, which will require partner states relinquishing their sovereignty."

The negotiations started in January in Arusha, Tanzania before continuing in Bujumbura, Burundi in February, Mwanza, Tanzania in April and Kigali, Rwanda.

The EAC Summit of Heads of State has set a March 2012 deadline for the conclusion of the Monetary Union protocol. After the Customs Union and the Common Market, the Monetary Union is the third stage in the integration process of the EAC bloc, which ultimately aspires to be a political federation.


 
Yes, no to join the Currency Tanzania... yatawapata ya Greece, our Monetary system is still like Socialists, we do have Trade Unions and a lot of workers comp Services and workers Support.

Kenya, Rwanda and partly Uganda they don't have workers benefits like Tanzania so this will harm us more as what is going in Greece they had a good retirement packages better than any other nations in Europe.

So let's us keep our Shillings ...
 
Kwa uchumi wetu huu wa data za kupika tukiingia huko lazima yatukute ya Greece. Hizi data za akina FF za uchumi unakua wakati tunaona jinsi hali inavyokwenda haitawezekana kwenye single curency!! Sasa hivi serikali kazi ni kupika data ili ionekane awamu hii kazi ni nzuri huku wanakopa CRDB pesa za mishahara!!
 
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