The East African Community (EAC) has unveiled an ambitious roadmap for establishing a single currency across the seven-member bloc, a move that could transform trade and economic integration in the region. The announcement came during the 23rd Ordinary Summit of EAC Heads of State held in Arusha, Tanzania.
The roadmap outlines a phased approach to monetary union, with a target implementation date of 2031. Key milestones include harmonizing monetary and fiscal policies, establishing an East African Monetary Institute, and creating convergence criteria that member states must meet before adopting the common currency.
‘This is a historic moment for our region,’ said EAC Secretary General Peter Mathuki. ‘A single currency will eliminate exchange rate volatility, reduce transaction costs, and boost intra-regional trade from the current 15% to over 40%.’
The proposed East African Currency Unit will initially function as a basket of existing national currencies before transitioning to physical notes and coins. Kenya, Tanzania, Uganda, Rwanda, Burundi, South Sudan, and the Democratic Republic of Congo are all participating in the initiative.
Economists have welcomed the plan but caution that significant challenges remain. Inflation rates vary widely across member states, from Rwanda’s 5% to South Sudan’s over 30%. Public debt levels and fiscal deficits also differ substantially, potentially complicating efforts to align economic policies.
‘We need strong political will and disciplined macroeconomic management,’ said Dr. Jane Kiringai, a senior economist at the Kenya Institute for Public Policy Research and Analysis. ‘The experience of the European Union shows that monetary union without fiscal union can create tensions.’
The business community has expressed optimism. Manufacturers and traders operating across borders currently face significant costs related to currency conversion and hedging against exchange rate fluctuations. A single currency would eliminate these expenses and simplify accounting procedures.
The roadmap includes provisions for establishing an East African Central Bank, which will oversee monetary policy and currency issuance. The bank’s headquarters location remains under negotiation, with Kenya, Tanzania, and Uganda all expressing interest in hosting the institution.
Source: East African Community, Reuters, Business Daily Africa
