EAC Financial System Risks Isolation After Monetary Union in 2024

But it’s a go! —and  central bank governors have called for fast-tracking of  legal frameworks to support the region’s monetary union.

EAC central bank governors in Kampala, Uganda July 14, 2016

EAC central bank governors in Kampala, Uganda July 14, 2016

 

By TZ Business News Staff

 

Central bank governors of the East African Community (EAC) member states have expressed fear   the regional financial system to be created by the monetary union in 2024 faces the risk  of  being isolated from the global international financial system.

A joint communiqué issued after the Governors’ 20th ordinary meeting  in Kampala,  Uganda  on July 14, 2016, where they met as the EAC Monetary Affairs Committee (MAC),  said  the governors identified  a number of looming risks which must be mitigated if the region is to be financially stable when the monetary union goes into effect in 2024—the risks which might include the possibility of isolation.

The governors reiterated their countries’ commitment to the EAC integration process, calling for the fast-tracking of the legal framework required to establish the monetary union if the 2024 timeline is to be successful. But the governors noted that global financial and economic developments continue to impact on the EAC economies.

“Challenges facing emerging economies and global demand dynamics,  unwinding of the  unconventional monetary policies by the US Federal Reserve Bank, Brexit and the risk of isolation of our financial system from the global international financial system are likely to adversely impact partner states capital flows, trade and investment, exchange rates and overall macro-economic stability,” the communiqué reads in part.

The governors underscored the need to put in place safeguards to mitigate against the imminent risks. They reiterated the need to rebuild international reserve buffers and  to strengthen  financial sector regulatory frameworks to ensure financial stability.

The 20th ordinary meeting of the Monetary Affairs Committee of the East African Community  was hosted by the Central Bank of Uganda at Serena Hotel  in Kampala.  The meeting was chaired by Prof. Benno Ndulu, Governor of the Central Bank of Tanzania in his role as current MAC chairman.

 

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Attendants included Jean Ciza, Governor of the Central Bank of Burundi (Banque de la Republic du Burundi), Dr. Patrick Njoroge, Governor of the Central Bank of Kenya, The Honourable John Rwangombwa from the National Bank of Rwanda and Prof.  Emmanuel Tumusiime Mutebile, Governor of the Central Bank of Uganda.

Others in attendance included Deputy Governor of the Central Bank of Uganda,  Dr. Louis Kasekende and the The Honorable Jesca Eriyo, Deputy Secretary General at the East African Community Secretariat in Arusha, in charge of  Productive and Social Sectors.  The joint communiqué says   representatives from the International Monetary Fund (IMF) were also present.

The Governors reiterated  the region’s commitment to  the EAC integration process and noted  the commendable job already done  on implementing  past committee decisions. They also noted, however, that  “while the legal framework for establishing institutions to support the establishment of the East African Monetary Union (EAMU) have been developed to advanced levels, there is need for the process to be fast tracked if the monetary union is to be achieved by 2024.

They also commended good progress seen in other areas of harmonization of monetary policy frameworks,  macro-economic statistics, monetary and exchange rate operations,  rules and practices governing bank supervision and financial reporting practices.

Other areas in which progress has been made include modernization and integration of  the payment systems and capacity building in preparation for the East African Monetary Union in 2024.