The east african community began moving towards monetary union in 2000 when the treaty reestablishing the community came into force. Mafusire, albert and brixiova, zuzana 2012, macroeconomic shock synchronization in the. Written by leading experts, including the president of. Countries are expected to attain headline inflation of a maximum eight per cent, a fiscal deficit including grants of not more than three per cent of gdp, a public debttogdp ratio of 50 per cent and forex reserves of at least 4. The eac journey to a monetary union began with the establishment of the east african monetary union in 2015, which provided a roadmap to achieve a single currency region within 10 years by 2024. The eac has a number of established organs that are similar to those of eu, namely the council of ministers, east african. Nov 30, 20 kampala reuters the leaders of five east african countries signed a protocol on saturday laying the groundwork for a monetary union within 10 years that they expect will expand regional trade. The east african monetary union is a project with potentially large long term benefits for all. East african trade bloc approves monetary union deal reuters. The east african community eac is an intergovernmental organisation composed of six countries in the african great lakes region in eastern africa. Africa have started to seriously consider monetary union, a few of them even setting tentative time tables for the process. It is intended to provide a followup to the 2012 regional. The process of creating a monetary union started early, but proceeded slowly.
Common payments system and financial sector regulatory regime. The east african community eac was originally founded in 1967 by kenya, tanzania and uganda, a postindependence evolution of the colonial era east african common services organisation. Towards a common currency in the east african communityeac. Haas policy brief given where the economy is at the moment and its prospects over the next two to three years, south sudan is highly unlikely to be ready to participate in the monetary union at inception, assuming this. African union handbook, which is an invaluable resource for those who work both with and within the african union.
Understanding the east african community and its transport. The customs union is the first regional integration milestone and critical foundation of the eac. With single east african shilling and common monetary and exchange rate policy. Establishment of the east african community monetary union. Progress in regional integration in east africa varies widely across these three recs.
Thus, in 2007 the eac member countries decided to fasttrack it, with the intention of signing a protocol to establish the east african monetary union eamu in 2012. Policy implications for the proposed east african monetary union. Free movement of capital and east african monetary union. Feasibility of a monetary union in the east african community. The eac customs union protocol came into force in 2005 and the implementation of the common market protocol commenced in 2010. The countries are more likely to satisfy the criteria for entry into a currency union after taking steps toward economic integration than. Protocol on the establishment of the east african customs. If monetary union is to work it will involve both sound fiscal policy and a slow, reversible process of integration involving a network of exchange rate pegs. These include a customs union, a common market, a monetary union, and a. Macroeconomic shock synchronization in the east african community albert mafusire and zuzana brixiova no 156 october 2012. East african community ministry of external affairs. The east african monetary union eamu is an important stage in the process of east african community eac regional integration. But this note argues that monetary integration undertaken prematurely can also pose serious risks. The protocol will pave the way for the transition to eamu over the course of the next 10 years and the complementary legal, institutional and economic reforms.
Convinced that cooperation at the subregional and regional levels in. African common market and monetary union, and the negotiations towards east african federation all underscore the serious determination of the east african leadership and citizens to construct a. Government and people of the republic of uganda and on my own behalf, i welcome our dear visitors to the ministry of east african community affairs meaca website. Remarks by mr emmanuel tumusiimemutebile, governor of the bank of uganda, at the opening of the east african. On behalf of the african union heads of state and government, it is my pleasure to introduce the 2019 edition of the.
The formation of a monetary union may be a significant step towards further economic integration and macroeconomic stabilization in east africa. Monetary union for the development process in the east african community. Considerations for south sudan joining the east african monetary union christopher adam, charles data alemi, and astrid r. Introduction analysis of the east african monetary union institute of. Making the most of the common market on the road to a monetary union is being jointly organized by the east african community eac secretariat, the european union eu delegation in tanzania, and the african department of the international monetary fund imf. Considerations for south sudan joining the east african.
It has since been ratified by all the partner states. A memorandum of understanding for currency convertibility has since been signed, and fiscal, monetary. Designing fiscal institutions for an east african monetary union. The east africa economy 20 report ascertains that monetary union will be a third pillar in the steadily deepening eac union, following a customs union and a single market. Its foundation began with the establishment of institutions such as the east african legislative assembly eala and the east african court of justice eacj. In november the leaders of five countries of the east african community eac agreed to form a monetary union. Burundi, kenya, rwanda, south sudan, tanzania, and uganda. Meaca karibu east africa the east african monetary union. While the abuja treaty continues to set the overall framework and ambition for african integration, the. This will serve to transform the east african economy to operate with a common currency by 2024.
The protocol sets a framework for adoption of a single regional currency and establishment of an independent east african central bank, whose mandate is to. Jun 09, 2018 countries are expected to attain headline inflation of a maximum eight per cent, a fiscal deficit including grants of not more than three per cent of gdp, a public debttogdp ratio of 50 per cent and forex reserves of at least 4. The eac the east african community is a much looser union than the eu and just the fact that an internal market in eastern africa has not even been fully implemented should make one very cautious about ea monetary union. Aug 01, 2017 the common market represents the second pillar of the eac regional integration process as defined by the treaty for the establishment of the east african community, following the customs union. The east african monetary union ministry of east african. The highlevel conference on regional integration in the eac. Dec 01, 20 the heads of state of five east african countries signed a memorandum for a monetary union in ugandas capital kampala on saturday. Pdf a common currency for the east african community. To this extent the eac countries established a customs union in 2005 and are working towards the establishment of a common market by 2010, subsequently a monetary union by 2012 and ultimately a political federation of the east african states.
Free movement of capital and economic and monetary union in the eu. The role of single currency for countries economic. South sudan and the east african monetary union south sudans accession into the east african community signals a strong commitment to regional integration. Cfta continental free trade area eac east african community. East african community eac close afrika mashariki road p. The planned introduction of the east african monetary union bis. Guglielmo maria caporale, hector carcel luis gilalana. The east african community eac has failed to meet its 2012 target of agreeing on the formation of a monetary union. However, several regional monetary union projects are planned such as ecowas, comesa, sadc and eac and a common currency for africa is a longterm goal of the african union. Exchange rate arrangements in the transition to east african monetary union article pdf available january 2012 with 27 reads how we measure reads. Eac achievements ministry of east africa community and. The euro crisis has put most people off currency unions. East african community law provides a comprehensive and openaccess text book on eac law.
Establishing a monetary institute for the region as an. For example, the revived east african community eac1 is targeting monetary union and ultimately a federation. To achieve these objectives, the key building blocks are the customs union, common market, monetary union, and ultimately the political federation. The east african monetary union protocol 2012 is yet to be signed and the date for eamu actual implementation of the common currency is uncertain.
Protocol on the establishment of the east african customs union. Streamlined customs clearance in east africa in recent years has helped increase regional trade photo. The heads of state of the east african community signed a protocol on the establishment of the east african community monetary union on 30th november 20. The consultations on the monetary union, which commenced in 2009, and fast tracking the process towards east african federation all underscore the serious determination of the east african leadership and citizens to construct a powerful and sustainable east african economic and political bloc. Working paper 156 macroeconomic shock synchronization. Currently the intention is to sign the east african monetary union protocol 2012, while the date. African economic and monetary union including setting up of african monetary union, a single african. It equally discussesthe process of monetary union in sadc in the context of the objectives set out in the risdp and makes a brief assessment of the status in this section area6. The rationale for the creation of monetary unions in africa is driven by different factors, including. Political federation is the fourth pillar and ultimate goal of the east african community integration and is anchored in article 123 of the treaty. The east african community eac is a regional inter governmental organization established under article 2 of the treaty for the establishment of the east african community that entered into force in july 2000. Eac consists of five neighbouring countries situated in the eastern part of africa, which include burundi, kenya. South sudan, the eac and east african monetary union.
This is to enhance the efficiency and performance of the custom union and the common market. Pdf monetary union for the development process in the east. Paul kagame, the president of rwanda, is the eacs chairman. For instance, across the west african economic and monetary union, in spite of a community directive applying to all countries, tax rates on gold exports varied between 2. Abstractthe aim of this paper is to assess the suitability of a monetary union among the east african community eac members. In recent years, the pursuit and interest of monetary union has become an important phenomenon in economic development. Eac monetary union protocol cooperation east african community. Index termsoptimum currency areas, svar, monetary union, east african economies. The east african monetary union is the third stage in the eac integration process. The eamu protocol was adopted in accordance with the eac treaty and signed on 30th november 20. African economic and monetary union including setting up of african monetary union, a single african central bank and a single african currency.
This is in line with articles 52, 82 and 151 of the treaty for the establishment of the east african community, whose goal is the eventual establishment of a political federation. The formation of the east african community eac in 1999 by the united republic of tanzania, the republic of kenya and the republic of uganda was the achievement of the trios cooperation since the collapse of the original eac in 1977. Customs union means the east african community customs union established by article 2 of this protocol. Five east african countries have joined forces with the aim of forming a single currency area by 2024. Feasibility of a monetary union in the east african. The african department toward a monetary union in the east african community asymmetric shocks, exchange rates, and risksharing mechanisms paulo drummond, ari aisen, emre alper, ejona fuli, and sebastien walker. African customs union sacu, the southern african development and coordinating conference and later the southern african development community, and the east african community eac. In late 20 the east african community eac countries burundi, kenya, rwanda. The protocol was signed on 30 th november, 20 by all eac partner states. Protocol on the establishment of the east african monetary union.
East africa economic outlook 2019 african development bank. Pdf exchange rate arrangements in the transition to east. Such a union would call for the creation of a new unified currency, similar to the euro. Honorable chairperson of communication, trade and investment committee of east. Currently, two monetary integrations in africa are in place.
The objective of the study was to establish the basis of the formation of east africa community common market and also to determine institutional challenges facing the east africa community common market in kenya. Tough convergence criteria established principle of variable geometry enshrined. Towards a common currency in the east african community. The organisation was founded in 1967, collapsed in 1977, and was revived on 7 july 2000. It is necessary to ensure the existence of adequate pre. While colonialism did play a role in africa s lack of development, the policies adopted by postcolonial leaders as well as their practices in power, denied. Toward a monetary union in the east african community. East african monetary union opening remarks by prof njuguna ndungu, governor of the central bank of kenya, during the east african legislative assembly workshop on the east african monetary union, nairobi, 4 march 2010.
Towards a common currency in the eastern african community. Currently the intention is to sign the east african monetary union protocol 2012, while the date for actual implementation of the common currency is uncertain. The east african monetary union eamu is an important stage in the process of east african. Comesa common market for eastern and southern africa monetary institute cmi and the east africa monetary institute eami. The african monetary union is the proposed creation of an economic and monetary union for the countries of the african union, administered by the african central bank.
The customs union was formally completed in 2010, and common market protocol was signed in 2009. The east african monetary union eamu protocol was signed on 30 th november 20. Although resentments and tensions between states led to its collapse in 1977, the project was revived in 2001. Pdf monetary union for the development process in the. Aspects of the incomplete fiscal architecture of the eurozone are reflected in the protocol.
After almost two years of negotiations, the five east african community countries appeared to be reaching agreement on how an east african monetary union will be formed and it was expected that a protocol would be approved at the eac heads of state summit at the end of november. The past year has seen significant progress toward. The east african community eac is a unique regional entity that was established in 2000 with a clear road map for establishing a customs union, common market, monetary union, and, ultimately, a political federation. Rwanda and the east african monetary union international growth.
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