12 February 2015, Dar es Salaam – A TEN-YEAR march towards East African single currency has started by forming a multi-sectoral task force to oversee macro-economic convergence in the region.
The task force to be formed soon will comprise members from the EAC bloc. The members will be drawn from ministries and institutions. Each state will appoint members for the task force from ministries of finance, industry, and east Africa; central bank and the attorney general’s office.
The main assignment for the joint task force, according to Bank of Tanzania’s Director of Economic Research and Policy, Dr Joseph Masawe, is to drive the member states to converge their macro-economics.
“The task force will oversee that member states are implementing the (East African) Monetary Union Protocol which has already been ratified,” Dr Masawe told Daily News.
The member states have to put together macro-economic criteria to the agreed levels of headline inflation 8.0 per cent and foreign reserve of 4.5 months equivalent of imports.
Others are fiscal deficit of 3.0 per cent to GDP and national debt (at net present value) ratio not exceeding 50 per cent of GDP. “It’s a long march toward single currency, but it’s attainable,” Dr Masawe said optimistically.
Currently, Tanzania, Kenya, Uganda and Rwanda headline inflation are below 8.0 per cent, which is one step ahead toward regional single currency.
The total national debt to gdp ration for Tanzania is below 50 per cent while foreign reserves are equivalent to 4.2 months of imports. Data gathered shows that Kenya and Uganda also have reserves above 4.0 months of future imports. Tanzania’s policy is 4.0 months of imports.
Early last year, the International Monetary Fund (IMF) requested East African countries to tread carefully on the single currency issues despite agreeing to provide technical assistance.
IMF said the Monetary Union Protocol is “very ambitious” and prone to multiple challenges ahead. IMF had it that regional monetary union would only hold when all the member States are able to respect and strictly observe the convergence criteria.
In 2012, IMF cautioned East African states against basing its single currency plan on EU experience as macroeconomic landscape and risks between EU and EAC are vividly different.
*Abduel Elinaza – Tanzania Daily News