The planned introduction of the East African Monetary Union…

Well, not just members of EMU are expanding but so are the monetary unions. Gulf countries were interested in setting their own union and now I relaise East Africa is planning one as well.

Mr Emmanuel Tumusiime-Mutebile, Governor of the Bank of Uganda enlightens me on the upcoming union.

The issue that we have gathered here to discuss today – the planned introduction of the East African Monetary Union (EAMU) – is one which will have profound effects on this region for decades to come. Later this year I expect that the heads of state of each of the partner states of the East African Community (EAC) will sign the Protocol for the introduction of the EAMU. 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. 

The East African Monetary Union is a project with potentially large long term benefits for all of the economies in the EAC but which also entails considerable risks. The long termsuccess of EAMU will be dependent upon major changes to public policy and in the way inwhich public policy is made in all partner states of the EAC. A successful monetary union is only possible if each partner state is prepared to accept the pooling of its economic sovereignty. Many economic decisions which are now made at the national level will have to be made at the regional level. 

This pooling of economic sovereignty extends beyond the loss of independent national monetary policy and exchange rates, which is of course inherent in a monetary union; it also requires that each partner state accepts constraints on its fiscal policy and implements fully the provisions of the common market, including not just free trade in goods and services within the EAC but also the free movement of capital and labour within the EAC. If we do not build the requisite foundations for monetary union, the introduction of EAMU may actually harm our economies. The problems which are currently being experienced by some of the peripheral members of the Euro zone – Greece, Portugal and Spain for example – which have lost competitiveness on international markets and can no longer use exchange rate depreciation to restore their competitiveness, should provide a salutary lesson to everyone involved in planning for the introduction of the EAMU.

Well no body will be rejecting the lessons from EMU crisis for sure, but is there a need for a mon union amidst diverse economic players…

Nice read anyways ..

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