EAC extends single currency deadline to 2031

The Governors of Central Banks in East Africa have officially agreed to fast-track the implementation of a common currency by 2031, following a realization that the initial deadline of 2024 was unattainable. This decision marks a significant step towards deeper economic integration in the region. Ted Kaberuka, Partner at Centrix Group, shed light on the process and challenges ahead during a recent interview on CNBC Africa. The journey towards a single currency for the East African Community (EAC) began with the establishment of the Customs Union, a milestone achievement that laid the groundwork for further integration efforts. Subsequently, institutions like the East African Assembly and courts were set up to support the implementation of decisions within the EAC framework. However, despite progress in these areas, the goal of establishing a Monetary Union by 2024 seemed out of reach, prompting a revision of the timeline to 2031. One of the primary hindrances to achieving a single currency has been the lack of substantial growth in intra-EAC trade. Currently, only 14% of trade within the EAC is conducted among member states, well below the envisioned levels for a successful Monetary Union. Political issues, such as trade tensions between countries like Rwanda, Uganda, Burundi, and Kenya, have also posed challenges to economic cooperation. Another significant obstacle lies in the economic disparities among EAC member states. Varying levels of economic development, fiscal policies, and political stability complicate efforts to harmonize financial systems and policies necessary for a common currency. Striving to meet the fiscal criteria set out for EAC countries, including a fiscal deficit not exceeding 3% of GDP and a debt-GDP ratio below 50%, remains a crucial task for member states. Despite these challenges, there is a strong commitment among EAC member states to advance economic integration and achieve the goals set out by the Monetary Union. The political will to deepen cooperation and the eagerness of heads of state to push for greater integration signal a collective determination to overcome obstacles and move towards a cohesive economic framework. As discussions unfold regarding the establishment of the East African Monetary Institute, a key institution for the implementation of a single currency, member states are vying to host the infrastructure. Decisions on hosting arrangements will need to balance political considerations with cost efficiency and operational effectiveness. Coordinating the distribution of institutions across member states will be crucial to ensuring the autonomy and efficiency of each body in the EAC framework. In conclusion, while the road to a single currency in East Africa is fraught with challenges, the commitment and determination of member states are driving the region towards greater economic integration. By addressing issues of trade barriers, economic disparities, and institutional efficiency, the EAC stands poised to realize its vision of a unified monetary system by 2031.