As EAC decision makers met in Arusha to discuss the future of the EAC monetary union, the East African Community Secretariat urged leaders to reach a consensus quickly.
« Our people, energized by the benefits out of the Customs Union and the Common Market, are more than ready to embark on reducing the cost of doing business by attaining a monetary union, » said Enos Bukuku, EAC deputy secretary general, in a communiqué issued ahead of the July 23-28 talks.
Bukuku said the negotiations could not afford to defer any more matters if the EAC was to achieve its 2012 target for concluding the monetary union protocol, another step on the road to establishing a common currency for member states. The common currency is widely considered to be the third step on the road to the ultimate EAC goal of political federation, after the customs union and common market.
However certain economists and decision makers, including Ugandan president Yoweri Museveni, have indicated that faster may not be better for the common currency.
“Political federation is crucial; when you have economic integration alone without political federation it becomes difficult to share the revenues. Market integration without political integration is bound to cause inequality and this is a problem, » Museveni said, speaking at a public lecture in Kampala.
At the same lecture, Mahmood Mamdani, the director of the Makerere Institute for Social Research at Makerere University in Kampala, suggested that moving too quickly toward a single currency could cause a situation similar to the Euro crisis.
« The Eurozone created a single currency without the political backing of the member states. Germany for instance is turning Europe into its backyard, it is achieving with banks what it failed to achieve with tanks during World War one and two, » Mamdani said.
He said that for the East African member states to follow a similar arrangement would mean replicating Eurozone crisis in the region. « It is advisable that the EAC first achieves political sovereignty before establishing a common currency. Failure of the first EAC was creating a common currency before properly marking out the political federation, » Mamdani said, adding, « Will this following of the western style not create an Euro type crisis? »
“It’s not the right time for EAC to have a single currency,” commented Prof. Paul Collier, an economist at Oxford University, in an interview with The New Times. “You need a lot of time; it’s not good to rush. There is a need to learn more, especially what would be the incentives among the partner states and the penalties for discipline to those who will not fulfil their obligations.”
He said the region must first focus on instituting strict rules and regulations to avoid financial crises that might hit the region in future. “Europe is suffering today because of breaking the fiscal deficit and balance of payment laws; an issue that the East African Community should avoid. It took Europe 44 year to negotiate and have a monetary union and EAC wants to do it within a few days; it’s wrong, they will regret it,” he said.)
