Wed, 30 Jan 2008 03:05:18 -0800 (PST)


Opening Remarks by Amb. Juma V. Mwapachu, Secretary General, East African Community

By Leo Odera Omolo
Kampala, Sunday 27th January, 2008

• Mr. Emmanuel Tumusiime-Mutebile (Governor, Bank of Uganda and Chairperson of the EAC Monetary Affairs Committee),
• Prof. Njuguna Ndungu (Governor, Central Bank of Kenya ),
• Prof. Benno Ndulu (Governor, Bank of Tanzania ),
• Mr. François Kanimba (Governor, National Bank of Rwanda ),
• Mr. Gaspard Sindayigaya (Governor, National Bank of Burundi ),

Distinguished Delegates, Ladies and Gentlemen,

On behalf of the East African Community, I join the Governor of the Bank of Uganda in welcoming you to this meeting of the EAC Monetary Affairs Committee. The presence of all the five Central Bank Governors at this meeting testifies to the importance you attach to this Forum. It also clearly manifests your personal interest and commitment to promoting deeper integration in the EAC.

May I take this opportunity to extend a special warm welcome to Professor Benno Ndulu to this august Committee and meeting and to congratulate you, Governor, most sincerely on your recent appointment as Governor of the Bank of Tanzania. Personally, having known you closely for several years, I have total confidence that, under your leadership, the Bank of Tanzania will quickly recover the crucial trust of the Government of the United Republic of Tanzania and of the people of Tanzania following the recent damaging report on the management of the External Payments Arrears Accounts.


Chairperson, Distinguished Governors,

I am beholden to extend EAC’s deep appreciation to the Bank of Uganda and to the Government of the Republic of Uganda as a whole for hosting this meeting; for your warm hospitality and for the excellent facilities that have been put at our disposal.

This meeting, Distinguished Governors, takes place against the backdrop of a disturbing and tragic environment in Kenya , EAC’s main economic powerhouse. The EAC is deeply concerned by the post-general elections violence, loss of lives, wanton destruction of property and the continuing political impasse in Kenya . The economic dislocation that has so far emerged and which would deepen, if return to normalcy is delayed, is most worrisome to all the five Partner States, some affected more than others. Indeed, the very viability of the EAC project has now been put under heavy test. As you meet and deliberate on deepening our integration process, we cannot be oblivious of these testing events and of the hard lessons we must draw therefrom.

Evidently, the EAC political leadership has all along been seized of the difficult situation engulfing and confronting this important sister Partner State of the EAC. Last friday, I was in Bukoba where I met the Tanzanian President, His Excellency Jakaya Kikwete, and was able to learn about his discussions with the Chairperson of the EAC Summit, His Excellency Yoweri Kaguta Museveni, on how to deepen EAC’s engagement in bringing about a modus vivendi and a rapprochement in the Kenyan political stalemate. On Monday this week, I had occasion to meet President Museveni at State House, Entebbe , and received assurances about what the EAC political leadership is doing in resolving the Kenyan political impasse. As you may be aware, President Museveni is now leading this effort from the frontline and on the ground.


Chairperson distinguished Governors,

Much as this is my first meeting with you, at this level, and thus the temptation is high, I am not going to act historian by recollecting the excellent work that this Committee has done in recent years in putting in place some of the key policy benchmarks and actions focused on monetary integration. Suffice to state that it is your commendable achievements, to-date, that has prompted the EAC Heads of State to believe that an EAC Monetary Union can be fast tracked and realized by 2012. Indeed, there is a directive by the 6th Extra-Ordinary Summit of EAC Heads of State that met in Ngurdoto, Arusha on 20th August 2007 that requires the EAC to explore how best we can move expeditiously towards the establishment of the Monetary Union by 2012.

In this context, I am aware that the Monetary Affairs Sub-Committee, comprising Senior Technical Officials from the Central Banks of the Partner States and from the EAC Secretariat, met in October last year to begin some ground work that would lead to the formulation of a strategic framework for fast tracking the establishing of the Monetary Union. The same Committee met over the last two days to further refine the work it undertook last October and which constitutes your working document at this meeting. I wish to pay tribute to this Sub-Committee for the hard work they have put in and the excellent document they have produced.


Chairperson, Distinguished Governors,

My hope, in this whole process, is that, as professionals, you will be bold enough to recognize that political will should always be ideally tested against realities on the ground. Monetary integration is complex and often shrouded in sensitive issues of sovereignty and economic preparedness. We should not, therefore, seek to re-invent the wheel. For instance, the experience of the European Union in moving towards and realizing the Monetary Union, which remains a quasi Union in that some key EU members still remain outside it, should constitute a useful lesson for our thinking and approach . As you know, the EAC is still grappling with the consolidation of the Customs Union. Yet, the process towards the establishment of the Common Market has already been launched with the aim of putting it in place, come January 2010.

So, yes, we must run while others walk, to cite a famous mantra of the Late Mwalimu Julius Nyerere. However, some hard realities clearly stare us in the face, especially since we live in complex and challenging times, globally and in our region. As a start, EAC’s enlargement does not make our vision and resolve for deeper integration any easier.

One could pose the question, for instance, whether we should have a two-speed EAC on the Monetary Union issue? And if so, how then do we respond to the current Treaty requirement for the Council of Ministers and the Summit of Heads of State to make decisions on the basis of unanimity or consensus? In turn, should the decision to establish a Monetary Union be taken by the Summit or should it, as is the case in the EU, be subjected to a referendum in the Partner States?

But the hard realities that stare us in the face have other bearings outside politics as well. These are fundamentally economic. In fact, the Economic Affairs Sub-Committee of the Monetary Affairs Committee addresses some of them quite well in their Report before you. They largely centre on the wide variation in the desired macro-economic convergence criteria that has been set out for the EAC Partner States. At the same time, the state of economic development and of preparedness to embrace a single currency and being subjected to a central fiscal and monetary authority, lies at the heart of the challenge of fast tracking the Monetary Union.

Even in the EU, the desired convergence as set out in the Fiscal and Stability Pact remains a nightmare several years of its being in place. Thus, compliance to laid down benchmarks on issues such as inflation rates, budget deficits, state subsidies and protection of the so called “national champions” (strategic state and private industries) remains fluid in the EU. On our part, centralized enforcement of a similar Pact, under the EAC, would require, as a start, the development of a robust and well managed database and system of macro-economic fiscal and financial statistics. This remains a major deficit in the EAC organizational system. There will also have to be an East African Central Bank working closely with what will necessarily have to be an EAC Commission. In the EU, such relationship has only consolidated after sometime. All these dimensions constitute onerous challenges. They can be met; but we need to work on the basis of accepting complex realities on the ground.


Chairperson, Distinguished Governors,

I hope that my hard sobriety about the way forward in this work shall not dent our spirits and resolve. I personally believe in the benefits of a monetary union and, in a related context, I am presently working earnestly to have an East African Capital Market established at the earliest moment. In this regard, I truly hope that Governor Ndulu will quickly make sense of the need for Tanzania to fully liberalise its capital account.

Finally, I commend the proposals of the technical team to you as the basis for the way forward. The journey to our economic liberation through deeper integration through monetary union must go on and the first step, probably not a hop and step, is crucial and urgent.