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Meeting in the Ugandan capital Kampala, heads of state of Burundi, Kenya, Rwanda, Tanzania and Uganda established the Monetary Union, which comes as the third institution in the Community’s gradual economic and political integration process.
A Customs Union was established in 2005, followed by a Common Market mechanism in 2010.
“[The] East African Community is now fully embarked on enormous, ambitious and transformational initiatives for our people. The promise of prosperity and economic development hinges on soundness of our integration,” said Kenyan President Uhuru Kenyatta.
EAC Deputy Secretary-General of Planning Enos Bukuku told reporters that the plan for a common currency is not a new one but is based on the fiscal discipline of a similar effort by Uganda, Kenya and Tanzania decades ago.
“We believe that even this time around when we are committed to create one single currency area, we will create a currency that will be of envy by some other regional economic communities and indeed some other countries,” said Bukuku of the EAC, home to some 140 million people.
But the common currency will not be implemented for some time. First, local currencies in the five countries have to be phased out.
This will then be followed by the creation of an EAC Central Bank – a necessary step toward making the common currency a reality.
The protocol stipulates that membership in the common currency is pending a number of conditions, including keep inflation at a ceiling rate of 8 per cent and sustaining debt to GDP ratios at around half.
The protocol anticipates these conditions and prerequisites will take a decade to be met.