At the same time East Africans are still digesting the implications of the EA common market, attention in many quarters is shifting to the monetary union. Even with a lot uncertainty still surrounding the common market given the dire level of public sensitization, optimistic East Africans cannot help but think further into the future.

The EA monetary union is expected to come with the creation of a single central bank and a single currency, and is seen in many ways as one of the most challenging shifts the region will undergo in the near future.

The monetary union had been penned in initially to be operational by 2015. However, experts say the merger of currencies will require sufficient political by the partner states. This has the potential to lengthen the currency shift given the different levels of economic performance of member states.

The interest in the monetary union is not only limited to East Africans. With a potential market block of 130 million people, external powers are predictably weighing in. The European Central Bank has already conducted a report on the matter among which one conclusion was that; the changeover from national currencies to a single one “must be properly anchored in society and particularly in the financial industry.”

The report went further to suggest two strategies if the East African Monetary Union (EAMU) is to be achieved.

First, EAMU would be kept as an aim with no firm public timeframe until all prerequisites appear to be within reach.

Second, that partner states would commit themselves to a firm date for the start of EAMU, relying on an institutional drive to act as a catalyst for implementing the necessary preparatory work.

Experts point to the fact that the first option has allows the rescheduling the EAMU without much reputational loss if convergence remains insufficient.

But the lack of a published deadline may deprive the project of the necessary political drive to maintain motion.

The second option, however, would set a deadline for EAMU but may carry the risk that EAC partner states rush into monetary union prematurely.

It is imperative to note that EA member states have deep rooted differences in economic policies a fact the commissioner for economic affairs at the African Union, Maxwell Mkwezalamba, acknowledges. Mr. Mkwezalamba however says a cautious move will ensure that these economic differences among partner states are minimised when they enter the common currency zone.

He also says the region should experience broadly synchronous economic cycles, similar external shocks and similar inflation and growth rates for a successful monetary union to be realised.

The ECB study identifies two phases of the convergence criteria the region should pursue.

In the first that, the primary criteria include maintenance of an overall budget deficit to gross domestic product (GDP) ratio of not more than six per cent, excluding grants, and of not more than three per cent including grants.

Annual average inflation rates should not exceed five per cent while external reserves are expected to cover more than four months’ imports of goods and non-factor services.

The secondary criteria include achievement of sustainable real GDP growth rate of not less than seven per cent and a national savings to GDP ratio of not less than 20 per cent.

In addition, countries are expected to ensure that their ratios of total domestic and foreign debt as a percentage of GDP and the balance of payments deficit on current accounts, excluding grants as a percentage of GDP, are sustainable.

A general opinion is that proper systems should be put in place to ensure that all partner state’s economic situation, especially those at the periphery, are factored in the monetary marriage to avoid what happened in the Euro zone recently.

A financial crisis there has laid bare the structural weakness of the Euro zone.

“It is one currency, but 16 different fiscal regimes. Currency union without political union and without a budgetary mechanism to move resources from richer to poorer areas was always a recipe for tension, as opponents of the UK joining the single currency have long pointed out,” Ruth Sunderland of The Observer said recently.

It is this rush that has apparently led to a pile-up of Spain’s debts, soaring unemployment and the deepening of its budget deficit.

Between 2000 and 2008, the country’s prices of goods rose by 35 per cent compared with a 10 per cent rise in Germany.

However, the European model has helped cushion its members against the adverse effects of the economic meltdown, among other problems.

Excerpts from The Weekly Review