Hatari Za Sarafu Ya Afrika Mashariki

Muke Ya Muzungu

JF-Expert Member
Jun 17, 2009
Source Michuzi
East African Single Currency, The Hidden Dangers Part I

East African bloc of nations is sprinting to launch its unified currency in a year or so. However, there are many underlying problems beneath the union’s monetary integration that could plunge the entire East African region into a crisis, far worse than that of Euro-zone, if careful, long term strategic study and planning are not put into consideration. In short, the common market- free movement of people and goods- between Rwanda, Kenya, Uganda, Burundi and Tanzania can continue without the 2012 scheduled common currency

Monetary and other unions are practices inherited if not imitated from the western nations. Despite the European Economic Community, and now European Union’s fifty-four year old existence, its common currency, the EURO, only came to into existence sixteen years ago. And out of the twenty seven member countries, only seventeen member states adopted the –EURO- currency. Britain opted out and maintained its Pound, and thus far remained out of the Euro-zone crisis.

Politically, socially, and economically, the EU is far ahead of us. Despite their relative economic, political and social advancements and superiority, it took them hundreds of years before they could form the European Economic Community in 1957 and subsequently European Union in 1993. On the other hand, The East African Union was hastily formed in 1967, just over five years after our independence, under the umbrella of East African Community, just to collapse ten years later in 1977, due to serious political differences which are still existing between the member states.

Monetary integration requires essential stability in the context of political, social and economic. Our young nations at the time of initial East African community lacked cohesion. Fifty-years down the road, our countries are far more polarized than they were few years after independence. Some of our neighbors don’t see eye to eye due to their deeply entrenched tribalism and ethnicity; they have slaughtered themselves in the past, while remaining potentially explosive and extremely delicate societies. Some of their political parties are more or less of tribal/regional outfits, fronting certain ethnic interests or tribal heroes.

Reading from the current European Union’s economic melodrama, under the name of “Euro-zone Debt Crisis”, one will wonder whether our leaders are reading from the same script, and could perhaps learn something worthwhile before they enter into the economic dark hole of monetary union. Ireland, Portugal, Greece, Iceland, Spain, and Italy are a few countries currently on hospice care, requiring the debt laden European Union, and its European Central Bank for bail out. The Euro-zone crisis, has proven to be a great burden and a nightmare to the single stronger German economy

European nations do not have uniform fiscal rules. Their bond-market enforcers have not always been attentive to enforce the needed rigid fiscal codes of conduct; they have varying risk of sovereign default across the euro zone. The EU member countries have uneven economic recovery plans, with each central bank trying to maintain laxity in its tax system. During formation of the Euro, its designers assumed that, without rules, fiscal mistakes by one member state would impose cost on all. German’s initial worry that unchecked deficits would be a burden on the European Central Bank to monetize public debts, and financially sound nations would be forced to bail out the spendthrift like Italy, a prophecy that came to be its nightmare

After more than half a century of fiscal and economic study, the Europeans still have no cure to their economic nightmare. The hasty East African’s monetary integration is a disaster in the making because its member countries have no clear fiscal policies to save their current sick economies, leave alone bailing out their counterparts should any fiscal or economic crisis emerge. In short, the union is not prepared to handle the bigger problems of bailing out member nations in case of financial crisis. Kenya for example will not be in position to bail out Tanzania should her southern neighbor run into a financial collapse, neither will Rwanda.

Need for uniform wages, relative to the cost of labor among the member nations, under the same currency, is a big challenge that requires many years of study and experiment before it can be put into place. Loss of national pride and sovereignty are other serious problems that have not been fully addressed and requires a national consensus or referendum. Transferring, giving up, or sharing of monetary and fiscal capabilities, will likely weaken a country’s fiscal competencies in the move for a single currency, in addition to losing sovereignty and national pride.

The list of potential problems related to the proposed single currency is long. The regional integration should however, continue only, with free movement of goods and people. In the interim, we must work within our countries to control endemic corruption, and impunity. Until internal political, economic, social divisions and mismanagement within member states are resolved, until clear fiscal policies are put in place, it will be on the best interest of our respective countries to tread cautiously towards a common currency. Else, it will be just another failed African project.
Mungu Ibariki Tanzania

John Makasha


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