The six countries of the East African Community (EAC) are working to achieve a common currency – modelled on the European Monetary Union. However, this is proving to be a difficult process. ‘Progress is slower than we expected,’ says Pantaleo Joseph Kessy, head of the department for fiscal and monetary affairs at the EAC Secretariat in Tanzania. In order to support the stakeholders and work with them to find new ways of progressing towards the common goal, the Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) GmbH commissioned the Academy for International Cooperation (AIZ) to design and run a study trip for the senior managers of the central banks of the EAC countries. Pantaleo Joseph Kessy joined the trip, and he explains here how the experience has given a boost to the stalling negotiations between the central banks and the East African Monetary Institute.
The main objective of the trip was to understand the roles of the state-run central banks in establishing an East African monetary union. The central banks wanted to gain a better understanding of how the tasks might be divided up between them and the East African Monetary Institute while a currency union is being set up. In addition, they wanted to see how the European Union (EU) shares out the responsibilities between the European Central Bank (ECB) and the national central banks, so they could obtain some orientation. Ultimately, the trip was intended to help develop a pool of experts and managers in the central banks of the East African countries, who know about harmonisation of finance and monetary policies and can drive this process forward.
Preparing for the East African monetary union is quite a complex process because it covers a large range of topics that are all related and which have been raised by various different groups. Progress is slower than expected, and recently enthusiasm has been dwindling. There are several reasons for that. One of them was the lack of clarity about the division of tasks between the various stakeholders.
The study trip was therefore very useful to the entire group of bankers and came at just the right time. During the trip we had some intensive discussions in the German Bundesbank, the European Central Bank, the German Federal Financial Supervisory Authority (BaFin), the EU and the National Bank of Belgium. This made the division of tasks among the central banks and the European Monetary Institute (EMI) much clearer to all of us. We understood precisely the different roles of the players, and that is good orientation and inspiration for us in many ways. During the trip the managers from the central banks of Tanzania, Kenya, Uganda, Rwanda, Burundi, South Sudan and the EAC secretariat were able to reach agreement on some important new steps and even to draw up an action plan for the future.
Having regained our enthusiasm as a result of the visit, the participants from the senior management at the central banks made a successful proposal to their governors. They were able explain to them how important it is that the central banks make the concrete preparations for monetary union, while the East African Monetary Institute coordinates the process. The experts at the central banks persuaded the governors to make specialist staff available to set up the currency union. Moreover, they explained to the governors that the Monetary Institute should have a similar structure to that of the EMI. For me, that was all a huge success and it promises a great future for the East African Community.
I will have achieved a great deal if the following three things are put into effect: that the East African Monetary Institute is established; that it has good staff and enough money to carry out its functions; and that ultimately a sustainable and effective East African monetary union is created.
As the study trip had such a positive effect on the attitudes of the central banks, I would like to see another, similar training event for the managers of the finance ministries of the East African countries. At the moment, they need to be more closely involved in the process. The discussions in the heart of the European currency union opened our eyes to new options and I’d be happy to think that the other players who we need for a successful East African monetary union would also have the opportunity to benefit from a study trip like ours.
I like listening and cooperating with others because this gives me new ideas and different perspectives. I always make an effort to behave in a way that creates added value for the people I am working with. My personal vision is to learn continually, to improve myself, and to be a person my children will one day be proud of!
GIZ is supporting the EAC’s integration process on behalf of the German Federal Ministry for Economic Cooperation and Development (BMZ).