Njuguna Ndung'u: Establishing the policy, legal and institutional
frameworks to support the creation of a single currency area
Remarks by Professor Njuguna Ndung'u, Governor of the Central Bank of Kenya, at the
18th Ordinary Monetary Affairs Committee Meeting, Arusha, 6 February 2015.
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My Fellow EAC Central Bank Governors;
Delegates from the EAC Central Banks;
EAC Secretariat Officials;
Distinguished Guests;
Ladies and Gentlemen:
Good morning. First of all, I would like to extend my sincere appreciation to the Governor and
the entire management of the Bank of Tanzania for the excellent organization and hospitality
extended to me and my team from Central Bank of Kenya.
Fellow Governors, we are meeting for the first time since the ratification of the East Africa
Monetary Union (EAMU) Protocol by all the Partner States. This not only demonstrates the
political will and commitment of our respective Governments but places a weighty
responsibility on all stakeholders involved in implementation of the roadmap towards the
single currency. In this regard, EAC central banks are expected to identify and deliver on
activities within their mandate as well as collaborate with other stakeholders to ensure all the
critical ingredients for a monetary union, as proposed in the EAMU Protocol, are well
articulated and implemented.
Fellow Governors, the Extra-Ordinary MAC meeting held in Naivasha in November 2014
identified strategic objectives and priority areas towards operationalization of the EAMU
Protocol that fall under the mandate of Central Banks and developed an action plan for
implementation. We now have the onerous task of taking this to the next level especially now
that the EAMU Protocol has been ratified by all Partners States.
Fellow Governors, the ratification of the EAMU Protocol set the stage for the establishment
of the policy, legal and institutional frameworks to support the creation of a single currency
area. EAC Central Banks are expected to play a pivotal role in the process leading to the
establishment of the four institutions responsible for the implementation of the EAMU
Roadmap. These institutions include the East African Monetary Institute (EAMI) to undertake
the preparatory work for the Monetary Union - this will fall heavily on the Central Banks; The
East African Surveillance, Compliance and Enforcement Commission - this will require some
input from us; The East African Statistics Bureau - we have a role to pay here; and The East
African Financial Services Commission. S0, time management and planning is important. I
note that the timeline for the establishment of EAMI is 2015 while the other three institutions
are to be established by 2018. Given that banks dominate, our regulatory capacity and
technology will be required.
Fellow Governors, Central Banks are also expected to support the development and
integration of the financial system as well as the implementation of other priority areas of the
EAMU Protocol including the attainment of Macroeconomic Convergence (by 2021),
Harmonization of Monetary and Exchange rate Operations (by 2022) and Introduction of the
Single Currency (by 2024). Realization of these milestones takes time and in some cases
may require review of the policy, legal and regulatory frameworks governing the financial
system, payments and settlement systems as well as adoption of common principles and
rules for the regulation and supervision of the financial system. In this regard, we need to
develop requisite capacity, within Central Banks and the region at large, to undertake
preparatory work for the EAMU.
I wish to commend our technical staff who have worked tirelessly over the past few days to
produce a very comprehensive report. I also extend appreciation to the EAC Secretariat for
their support in our activities as well as reaching out to Development Partners who have
continued to support the EAMU process. In particular I take cognizance of the IMF's
continued partnership with EAC countries in the modernization of our policy frameworks.
Fellow Governors, I assure you of the Central Bank of Kenya's commitment to
operationalization of the EAMU Protocol. As you very well know we have to open and close
many doors of our working life. Time has come for me to close the central banking one,
which was a special one for me in the sense that my engagement as Governor of the CBK
gave me a rare opportunity to conduct monetary policy in practice. Some theories we held so
dear have been put to the test and they were found to work even better in practice. I leave
the Central Bank with a great sense of pride and accomplishment, which I can not do ample
justice to highlight within the short space of time that I have now. I am sure another forum will
open where I will share more broadly my experience while serving at the helm of Kenya's
financial sector. But one important accomplishment for us all is that we have transformed our
Central Banks into strong institutions. They have promoted operations by defining the
appropriate rules and developed the financial markets using a combination of appropriate
rules of the game and appropriate incentives/(penalties) to encourage prudent behavior in
the market. I enjoyed your trust and warm companionship, and notably your commitment in
driving and modernizing the financial sector in the region over the last 8 years of my term.
Let me conclude by once again, thanking the Bank of Tanzania for the warm welcome and
hospitality. With these few remarks, I look forward to fruitful engagement in discharging our
mandate in this meeting.
Thank you.