By George Omondi
A model monetary union that has worked in Europe for over a decade may not apply in East Africa, experts have said, hinting at possible delay in coming up with a single regional currency.
Top International Monetary Fund (IMF) officials said that while European Union's (EU) macro-economic integration provided an important starting point for East African Community (EU), the region's negotiators have an additional task of tweaking it to fit region's economic landscape.
"A single currency in EAC will not result from the same macro-economic landscape as in Europe and risks will potentially be different," Mr Naoyuki Shinohara, IMF deputy managing director said in a podcast uploaded on the organisation's website last week. Mr Shinohara yesterday joined the region's finance ministers, Treasury PSs, central bank governors and academics in a two-day monetary union meeting that IMF has co-hosted with EAC secretariat in Arusha.
The meeting themed, "The East African Community after 10 Years: Deepening EAC Integration", discussed lessons that the region can draw from the eurozone crisis as it seeks to create its own monetary union
"The EU single currency plan provided members with access to very large internal and global pool of savings at low rates of interest that allowed some countries to sustain private sector imbalances for a long period of time," said Mr Shinohara. This, he said, sharply contrast with situation in EAC where domestic saving pool is much smaller.
To a greater extent, these views -- which effectively imply that integration milestones of EU cannot be used as straight forward blueprint by the region -- is a setback to integration negotiators.
The negotiators, made up of top government officials from Kenya, Burundi, Rwanda, Uganda and Tanzania have been banking on the experiences of other blocs to speed up their work.
They have previously borrowed heavily from EU model to come up with Custom Union Protocol in 2005 and the Common Market Protocol five years later.
The team has agreed on 49 out of 96 Articles of the proposed monetary union and had hoped to ride on the EU experience to finalise the remaining areas.
Among the pending Articles are provisions on co-ordination of monetary policy and fiscal policies, restrictions on central bank lending to public entities and the restrictions on privileged access to financial institutions.
Also outstanding are conditions for bail-outs, conduct of foreign exchange transactions by partner states, management of foreign exchange reserves and determination of currency conversion rates.
Only last month, EAC secretariat dispatched a 20-member delegation to Brussels, Luxembourg, Frankfurt and Berlin on a 12-day study tour to enhance understanding of the EU model.