By Kenan Kalagho, 29 October 2012
Dar es Salaam, Tanzania — With prospects of South Sudan joining the
East African Community later this year, making it the sixth country to
join the bloc after Burundi and Rwanda, the EAC member states have been
asked to harmonize Monetary Union policies if they are to have the
common currency as the bloc moves towards attaining a political
federation.
(The Minister for EAC Mr Samuel Sitta)
Presenting a paper on 'Euro Crisis and lessons for EAC', in Dar es
Salaam, Tanzania Minister for East African Cooperation Mr. Samuel Sitta
said the East African regional bloc is undertaking different
negotiations within the member states which will lead into the signing
of the Monetary Union protocol.
Sitta said as the bloc moves into the Monetary Union, there is need
for the regional bloc to fully implement and adhere strictly into the
signed Monetary Union protocols like the trend of government borrowing
in order to create a conducive environment.
"The East African Community is going to have a criterion for fixing
the limits of restricting budget deficit borrowing if the region is to
remain with a strong currency; Sitta said adding that "the system of
borrowing had affected much the European Union where countries borrowing
under the mortgage scheme had inflated the value of buildings."
He said full implementation of the Customs Union and Common Market
signed area by the member states were necessary condition for attaining
the real economic convergence in the region and qualify as an optimum
currency area capable of establishing a sound and robust monetary union.
Sitta however noted, while with EU experience, the road towards
Monitory Union was challenging, the attainment of agreed nominal
convergence criteria in the region without underlying real economic
convergence was not sufficient for the creation of a sound and
sustainable monitory union.
He pointed out while imposing enforcement of financial sanctions
against sovereign state in the member states will prove to be a
difficult task, the adherence to the fiscal rules by the member states
will depend much on the willingness of the states and their national
development challenges.
The EAC minister also said the real economic convergence will lead to
homogeneity in national policies among partner states and thus cushion
against conflict between national and regional economic policies which
could hamper the well functioning of the Monitory Union and that the
introduction of surveillance mechanism was an important tool in
regulating the macroeconomic imbalances.
"One market means that we (in the East African region ) will be
proclaiming for one investment which will require one currency, Sitta
said, adding that however difficult the Monitory Union might be, it will
be good for the region and improve the region's economic development"
On his part the Kenyan Ambassador to Tanzania Mr. Mutinda Mutiso said
the foundation of integration was to trade and exchange the value of
goods in that creates an environment into doing the business in a bigger
way.
He said there was need for the EAC to learn from the experiences of
the EU and the Euro Zone crisis because the bloc was one of the
partners' in businesses where goods from the EAC regional bloc were
being exported.
