Kenya’s aspiration to be the regional financial hub could receive a boost if East African Community (EAC) states endorse the proposal that the country be the host the East African Monetary Institute (EAMI). Establishment of the EAMI will provide the institutional framework towards the implementation of the monetary union by 2024.
Upon completion of the transition process, the EAMI will transform into the East African Central Bank with Nairobi as its home. The Monetary Union Protocol outlining the 10-year road map to have an East African monetary unit (EAMU) by 2024 was signed by EAC Heads of State in November, 2013 in Kampala.
But implementation is already years behind schedule with the requisite bills yet to be considered by the East African Legislative Assembly. According to the protocol, the Monetary Institute was expected to have been up and running by 2015, paving the way for the operationalisation of other enabling institutions supposed to have been in place by this year.
These include the East African Statistical Bureau, the East African Financial Services and the East African Surveillance, Compliance and Enforcement Commission. With this delay, it is quite telling that it should be the financial aspect in the progression towards full integration that the region is most behind, comparing with the other Regional Economic Communities on the continent.
The Africa Regional Integration Index Report (ARII) inaugurated in 2016 classifies integration indicators in five broad categories, namely: Trade integration, regional infrastructure, productive integration, free movement of people and financial and macroeconomic integration.
According to the ARII, the EAC is the most integrated region on the continent standing out in all the indicators, except in financial and macroeconomic integration which remain wanting.
This is perhaps not surprising, as the Southern Africa Common Monetary Area was established more than three decades ago in 1986 with Namibia, Swaziland, and Lesotho linking their currencies to the South African Rand.
Likewise, the CFA franc shared among eight West African countries under the West African Economic and Monetary Union formed more than two decades ago in 1994. Adding to the seeming EAC fiscal lag, are the convergence aspersions that have been cast by analysts’ dissatisfaction with other indicators that the EAC member states are struggling to comply with key economic targets on public debt, inflation, forex reserves and budget deficit.
It is still memorable how, for instance, in February last year Christine Lagarde, the International Monetary Fund managing director, urged the EAC to focus on consolidating integration gains achieved in infrastructure, the Common Market and the Customs Union integration while going slow on the monetary union.
She pointed out to the persisting fissures in the bloc over the Economic Partnership Agreement with the European Union, in addition to low intra-regional trade and non-tariff barriers issues that still dog the region.
She noted these as signs that the building blocks were not firmly in place for an EAMU. Nevertheless, the EAC member states remain resolute in their determination towards integration. Other building blocks such as realignments of the central banks, capital markets and stock exchanges are on course.
While the pace may appear slow, there’s no question about the commitment if one reads the body language of presidents Uhuru Kenyatta and Yoweri Museveni during their recent launch of the one-stop border post in Busia, or, the resolve at the Kampala Heads of States summit to iron out any differences that have had tongues wagging about the member states’ pledge to the integration ideal.
Also, the EALA legislators have just concluded on-spot assessment of institutions, installations and facilities of the EAC on the Central Corridor and the Northern Corridor and now have a better grasp of some of the challenges still besetting the region’s pathways to collective development.
It should be expected the pending bills to enable the requisite institutions towards the monetary union will be debated and the kinks ironed out to smoothen the process towards a common currency. The term of the previous EALA ended before considering the bills. One, however, wonders what could be learnt from experiences elsewhere.
With Brexit consuming British and European Union politics in what is turning out to be an acrimonious divorce, it is not inconceivable that EAC member states are paying attention.
And that EALA, in considering the pending bills and the general legal framework, should do well to learn from the EU and others such as the Association of South East Asian Nations (ASEAN).
Attainment of the common currency will only be the third pillar of EAC integration, even as the Customs Union and the Common Market preceding it continue to be streamlined. Other than that, only time will tell when, or if, the final pillar—political federation—will come to fruition. —The writer is a commentator on regional issues – @gituram