A key parliamentary committee has endorsed the protocol laying the foundation for a monetary union that will see the five East African countries converge their currencies and increase commerce.

The Committee on Regional Integration last week permitted the protocol, which was signed last year by the leaders of the five countries, and is asking Parliament to endorse the monetary union—which is expected to be in place within nine years.

“It is convinced that the protocol for the establishment of the EAC Monetary Union will be beneficial to individual member States of the East African Community and therefore recommends that the House ratifies the protocol,” said the committee in an advice to MPs.

The protocol allows Kenya, Uganda, Tanzania, Rwanda and Burundi to gradually converge their currencies and increase commerce.

Established 13 years ago, the EAC with nearly 140 million people has already created a common market and a single customs union. The Cabinet approved the protocol and sought the nod of Parliament on July 22.

“The existence of multiple currencies in the EAC region discourages trade and investment among partner States due to foreign exchange transactions costs,” read the Cabinet’s notice to Parliament.

In the run-up to achieving a common currency, the East African Community (EAC) nations aim to harmonize monetary and fiscal policies and establish a common central bank.

Kenya, Uganda, Tanzania and Rwanda already present their budgets simultaneously every June.

“This implies that Central Bank of Kenya (CBK) shall not be responsible for formulating monetary policy, promoting price stability and issuing of currency,” the Cabinet memo reads in part.

Amendments to the Kenya laws will be needed for monetary union plan because these roles are currently vested on the CBK.

“These amendments ought to be done before 2021 as per the road map for the establishment of the Monetary Union,” the Cabinet added.

Source:: Business Daily

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