Emmanuel Tumusiime-Mutebile: Fast tracking East African Community
Monetary Union
Opening address by Mr Emmanuel Tumusiime-Mutebile, Governor of the Bank of Uganda, at
the Monetary Affairs Committee Meeting on Fast Tracking East African Community Monetary
Union to 2012, Kampala, 23 January 2008.
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Ambassador Juma Mwapachu, the Secretary General of the East African Community,
Fellow Governors from the Central Banks of the EAC Partner States,
Ladies and Gentlemen
Good morning!
Let me start by welcoming you all to Uganda "Gifted by Nature" and to Kampala, our lovely
capital, the City of undulating hills and the host city for this Extra-ordinary Meeting of the
Monetary Affairs Committee (MAC) of the Fast Tracking of the East African Community
(EAC). Let me at the outset recognize the presence in our midst of Ambassador Juma
Mwapachu, the Secretary General of the East African Community. Allow me also to
congratulate Professor Benno Ndulu upon his very recent elevation to the post of Governor
of the Bank of Tanzania by His Excellency Jakaya Kikwete the President of the United
Republic of Tanzania; and to congratulate Mr. Gaspard Sindayigaya, upon his appointment
as Governor of the Bank of the Republic of Burundi by H.E. S.E. Pierre Nkurunziza the
President of the Republic of Burundi. I join my fellow Governors of the Central Bank of Kenya
and the National Bank of Rwanda in welcoming you, the Honourable Ndulu and the
Honourable Sindayigaya, to the Monetary Affairs Committee of the East African Community.
We look forward to learning from your wisdom and profiting from your able leadership at this
very important juncture in the process of economic integration of the East African region.
Ladies and gentlemen, Article 5(2) of the EAC Treaty, Article 5(2) stipulates that
"....the Partner States undertake to establish among themselves and
in accordance with the provisions of this Treaty, a Customs Union, a
Common Market, subsequently a Monetary Union and ultimately a
Political Federation in order to strengthen and regulate the industrial,
commercial, infrastructural, cultural, social, political and other
relations of the Partner States to the end that there shall be
accelerated, harmonious and balanced development and sustained
expansion of economic activities, the benefit of which shall be
equitably shared...."
Furthermore, the 6th extra-ordinary meeting of the Summit of the EAC Heads of State
decided that East Africa should move expeditiously towards establishing a Monetary Union
by 2012. The Summit decided that a strategic framework to fast track the establishment of a
Monetary Union should be developed for consideration by the next meetings of the Council
and Summit.
As part of the process of implementing these decisions, in October 2007 the Economic
Affairs Sub-committee of the MAC met in Entebbe to develop a strategic framework which
can fast track EAC Monetary Union in 2012. The Sub-committee discussed the convergence
criteria and timeframe; the model protocol and institutional structure of the EAC Monetary
Union; and harmonization of macroeconomic statistics. Fellow Governors, our role today is to
consider the Report of the Economic Affairs Sub-committee report with a view to agreeing on
a strategic framework covering the legal, institutional and organizational preparation for the
region to achieve monetary union according to the timetable that has been determined by the
Summit.
The first manifestation of a Monetary Union is a common currency. Therefore the strategic
framework must include a Monetary policy by the five Central Banks that will serve to ensure
that the unified regional currency will be stable in order to foster further economic and
financial integration among Partner States. While, it is conceivable that not all the Partner
States may be ready for accession at the same time on account of the failure to fulfil
simultaneously all of the macroeconomic convergence criteria, the Treaty established
unequivocal commitment for all the Partner States to join the EAC monetary union and
therefore, to adopt policies consistent with this aim.
It is, therefore, axiomatic that the success of the EAC monetary union will depend on the
establishment of the EAC currency and single monetary policy; sustainable macroeconomic
convergence among the Partner States; and a balanced policy mix between fiscal, monetary
and other economic policies. The strategic framework should therefore provide for a
mechanism for monitoring and coordinating Partner States' economic policies to promote
convergence. Meaningful monetary and financial integration can be achieved only with a
sustainable convergence of economic fundamentals, particularly price stability, and sound
fiscal, monetary and structural policies. Short of that, fellow Governors, ladies and
gentlemen, it may even, be counterproductive to try to artificially forge a monetary union. But
failure is not on the agenda. Our Heads of State have decided that we must have a Monetary
Union. Our role is to help to deliver it.
I cannot emphasize enough the need for sustainable macroeconomic convergence as the
bedrock for the EAC Monetary Union. A durable monetary union depends on a high degree
of sustainable convergence regarding price stability, sound fiscal and monetary policies,
exchange rate stability and convergence of long-term interest rates in the region.
Ultimately, the strategic framework should stress the application of the convergence criteria,
institutional arrangements for EAC monetary union and a clear timetable for the preparations
necessary to ensure successful establishment of a unified regional currency and central
bank. Governors and colleagues, the fast tracking of EAC monetary union is upon us, and
we must rise to the occasion and meet the challenge head on. We must be strong advocates
of this noble cause and convert the sceptics. We must seize the day or as they say in Latin,
carpe diem!
Thank you.