Pressure EAC Leaders to Adopt Single Currency, Jakaya Kikwete tells Young People

The former Tanzanian President, Jakaya Kikwete, has tasked the young people of East Africa to pressure their presidents to expedite the process for the adoption of the East African Community’s (EAC) single currency.

Kikwete, who on Monday this week was speaking at the Guild Leaders Summit at Makerere University, said young people in East Africa must shout and call for a monetary union and political federation in order for their voices to be heard.

“We have now to focus on the monetary union and the political federation. This is where you have to shout to be counted. Make noise as young people of East Africa to be counted. Call on the leaders to expedite the process and move fast; complete the monetary union stage, and after that, move fast to the political federation,” he said.

The East African Monetary Union (EAMU) is an important stage in the process of East African Community Regional Integration.

In 2013, EAC member countries set a target for a single currency by 2023.

The EAMU Protocol was adopted in accordance with the EAC Treaty and signed on November 30, 2013. It lays the groundwork for a monetary union within 10 years and allows the EAC Partner States to progressively converge their currencies into a single currency in the Community.

This, however, was not achieved, and the bloc has since pushed the target date to 2031.

Last year, a Ugandan man designed a “fake” East African currency, which hoodwinked millions of people across the East African region into believing that the banknote had been issued by the EAC Secretariat.

The Secretariat, however, debunked it, saying that the journey to a single currency was still a work in progress.

“The EAC Secretariat wishes to inform all our stakeholders that the partner states’ journey to a single currency is still a work in progress. Kindly ignore any rumors circulating in social media about the unveiling of new banknotes for the region.”

In the run-up to achieving a single currency, the EAC Partner States aim to harmonize monetary and fiscal policies; harmonize financial, payment, and settlement systems; harmonize financial accounting and reporting practices; harmonize policies and standards on statistical information; and establish an East African Central Bank.

The eight EAC member countries, which include Uganda, Kenya, Tanzania, Rwanda, Burundi, South Sudan, Somalia, and the Democratic Republic of the Congo (DRC), are very different in terms of their culture, economies, physical size, and politics.

Although having a single currency can enhance cross-border trade by reducing costs and simplifying transactions, potentially fostering economic expansion, its advantages may not be evenly distributed among all nations. Concerns arise that Kenya, being the most advanced economy in the region, could exert excessive dominance within the monetary union.

Kikwete insinuated what he thought could have made the EAC leaders reluctant to adopt a monetary union.

“What we have been doing as East African countries is harmonization of fiscal and monetary policies, but when it comes to the monetary union, it is not harmonization; it is common fiscal and monetary policies. It is not easy because, with common and fiscal monetary policies, you agree on what percentage of the GDP is going to be borrowed. You cannot say I want to raise money, so I am going to borrow from the banking system. This is what they are doing in the European Union; it’s 3%. No country can borrow beyond 3%. On that one, we gave ourselves 10 years to transcend into the monetary union, which will also mean common currency and so many other things. 10 years have passed now, and  I don’t know how far we are. I think we are still in discussion,” he said.

EAC CUSTOMS UNION

The Customs Union is the first regional integration milestone and critical foundation of the East African Community, which has been in force since 2005, as defined in Article 75 of the Treaty for the Establishment of the East African Community.

Under the customs union protocol, EAC Partner States agreed to establish free trade (or zero duty imposed) on goods and services amongst themselves and agreed on a common external tariff (CET), whereby imports from countries outside the EAC zone are subjected to the same tariff when sold to any EAC Partner State.

“In the treaty establishing the East African Community, we agreed that the entry point is a customs union. In cooperation, it is just cooperating, but in integration, we are now trying to weave the economies of our three countries (Uganda, Kenya, and Tanzania in 1999) into one economy, and there are benchmarks. The first benchmark is what they call the preferential trade area or the free trade area, when you allow goods from member states to move across borders at zero tariff, no customs duty,” Kikwete said.

Despite the presence of the customs union, some goods originating from EAC member countries have been subjected to non-tariff barriers by some bloc members, which Kikwete said must be addressed.

“We still have a problem with tariff barriers; we have to sort out non-tariff barriers,” he said.

MUSEVENI IS A BEDROCK OF EAC

Meanwhile, President Kikwete applauded Uganda’s leader, President Yoweri Museveni, describing him as a “bedrock” of the East African Community for his push and advocacy for the East African federation.

“That is why I am saying that President Museveni has been the bedrock of the East African Community and has been doing a lot of work in convincing the other leaders to move as fast as possible to get to the political federation,” he said.

Museveni has repeatedly restated his desire for the East African Federation, which he says provides political and economic benefits for the region.