Cross-Border Payment ‘Headaches’ Impeding Smooth EAC Monetary, Political Union

By TZ Business News Staff 

Money is proving a stumbling block in the integration process toward forming the East African Federation,  a Communiqué recently issued by the East African Community Monetary Affairs Committee ( (EAMU) has indicated.

The East African Community, comprising of six independent states, committed in 1999 to form a political federation in a four-step process:  Custom Union first, then a common market, a monetary union followed by a political union. There is a headache at step number three.

Current EAC member states include Tanzania, Kenya, Uganda, Rwanda, Burundi and South Sudan.  Congo DRC has asked for membership into the block; it has been accepted pending a few technicalities.

The block recently decided to fast-track the end goal — the political union, by combining the monetary union process with the political union; but there is a currencies confusion where each member State has different exchange rate.

Kenya, Uganda and Tanzania use the Shilling inherited from colonial Britain.  Rwanda, Burundi and soon to be member Congo DRC use the Franc (otherwise called Amafaranga in some member states) inherited from colonial Belgium. South Sudan uses the South Sudan Pound.

At the end of its 25th ordinary meeting held virtually March 4, 2022  the EAC Monetary Affairs Committee issued a communiqué to the media, reporting that they had found a number of economic variables in the block moving in the right direction — except implementation of targets set  to move the EAC toward a monetary union.

The block appears to be experiencing headaches moving francs, shillings and pounds across borders. If monetary union processes were merged with political union processes as is the case, the EAC political union is in jeorpedy, and money is the problem.

The Committee reviewed the status of implementation of previously agreed actions towards the establishment of the East Africa Monetary Union (EAMU), with a focus on the decisions of the 24th Ordinary MAC meeting held virtually in October 2020. The Committee reflected on the progress in attaining the convergence criteria and highlighted the areas that are lagging behind.

“The Committee noted that there have been delays in realising targets set out in the [East African Monetary Union] – EAMU roadmap, and that there are several challenges that could further impede the timely implementation of EAMU protocol,” the communiqué reads in part.

“Therefore, the Committee pledged to work with the EAC Secretariat and other stakeholders in the EAC integration process to fast-track pending activities of the EAMU roadmap.

“The Committee noted progress still to be made in cross-border payment systems and agreed on continuing interoperability initiatives at national level, enhancing the East African Payment System (EAPS), while engaging other stakeholders at continental level on further integration of cross-border payment systems,” the communiqué reads.

There are areas, however, where good progress has been made.

The Committee noted that partner States’ Central Banks have made significant strides towards the creation of key institutions of the of the East African Monetary Union (EAMU), particularly the East African Monetary Institute (EAMI); harmonization of monetary and exchange rate policies; harmonization of regulatory frameworks; implementation of measures to strengthen regional payments systems; enhancement of cybersecurity frameworks; capacity building in AML/CFT and Risk Management for Partner States Central Banks; and promoting cross-border trading in government securities.

Members of the Committee  included Hon. Moses Makur Deng, Governor of the Bank of South Sudan; Hon. Audace Niyonzima, Deputy Governor of the Bank of the Republic of Burundi;  Hon. Soraya M. Hakuziyaremye, Deputy Governor of the National Bank of Rwanda; Dr. Michael Atingi-Ego, Deputy Governor of the Bank of Uganda; and Dr. Yamungu Kayandabila, Deputy Governor of the Bank of Tanzania.

The EAMU meeting was held against a backdrop of rising global inflation, tightening financial conditions, and worsening debt vulnerabilities for developing economies owing to the protracted COVID-19 pandemic, and geopolitical tensions. To manage these developments, most EAC Partner States Central Banks continued with accommodative policy stance complemented by regulatory changes including relaxation of rules on loan classification/restructuring, extended lending facilities, exceptional liquidity assistance, and reduced charges on mobile transactions to support financial intermediation and digitalization. The Committee also took note of the increasing financial innovations.

The Committee noted that economic growth in the EAC region recovered in 2021 to an average of 4.2 percent, largely supported by easing of COVID-19 related restrictions, public investments and strong performance in the agriculture, services, construction and manufacturing sectors.

Growth in the region is expected to improve supported by a resumption of global economic activity with the easing of containment measures and sustained implementation of growth-supporting measures. Downside risks remain elevated due to a slower global growth, rising geopolitical tensions and increasing commodity prices.