exchange rates, because of the interest rate differentials. the success and sustainability of the monetary union will depend at least partly on its credibility. crucial to its credibility will be fiscal discipline and this requires fiscal rules to prevent free riding by any individual partner state. in a monetary union, the costs of fiscal indiscipline by one member of the union are partly externalised to the other members. the possibility that the profligate sovereign borrower might be bailed out, directly or indirectly through higher inflation, by its partners, will drive up public borrowing costs for all members of the monetary union. the future of the monetary union itself could be thrown into doubt if the financial markets and public believe that a member with serious fiscal problems cannot solve these problems within the monetary union, essentially because the solution would be too deflationary, and hence opts to leave the monetary union. this is the concern which many commentators have expressed in relation to the current economic and fiscal problems of greece. to avoid these problems we must put in place binding, transparent fiscal rules covering fiscal deficits and public debt, which will operate both during the transition to monetary union and after the monetary union has been established. i trust that the principle of fiscal rules is generally understood and accepted within the east african community. however there are some who argue that these rules should be made less stringent – i. e. the fiscal deficit targets should be loosened – to allow for much higher public spending, on the grounds that there are large unmet demands for public investment within the east african community. unfortunately this misses the point. if the monetary union is to be successful, the targets for fiscal deficits and public borrowing must be tight enough to ensure that the partner states of the monetary union run fiscal policies which are sustainable, and are perceived to be sustainable by the markets, even in the face of adverse fiscal shocks, such as a cyclical downturn in the tax base or a cutback in donor aid. conclusion the 21st century global economy will present enormous opportunities for east africans to lift their economies to middle income status, raise living standards and eradicate mass poverty. we will be much better placed to take advantage of these opportunities and to face up to the challenges if we can achieve deep and meaningful integration of the east african economies. monetary union is an essential component of regional economic integration. establishing a monetary union in east africa will be difficult and will pose risks. it will require an enormous amount of work to reform institutions, change legislation

the ministry of finance planning and economic development, the ministry of justice and constitutional affairs, the uganda communications commission, the capital markets authority, the uganda bankers association and the technical staff from bank of uganda. in a special way we would like to thank the eac and the african development bank for the support provided under the eac - payment and settlements system integration project. the next steps after the stakeholders workshop will be as follows : to incorporate comments from the workshop. the draft bill will be submitted to parliament through the minister of finance planning and economic development for the enactment of the payment systems law followed by the president ’ s assent. bank of uganda will then operationalize the law. with these remarks, i wish the stakeholders interactive and fruitful deliberations.