November 1, 2016
PRESS OFFICER: Andrew Kanyegirire
Phone: +1 202 623-7100Email: MEDIA@IMF.org
Policymakers in the East African Community (EAC) met October 31-November 1 to reaffirm their commitment to building a strong economic and monetary union
Progress has been made in the regional integration of the financial sector, payment systems and financial markets
A session on statistics and capacity development highlighted the progress being made in harmonizing economic and financial statistics
The East African Community (EAC) Secretariat, the European Union (EU), and the International Monetary Fund (IMF) jointly organized a high-level conference entitled “ Regional Integration in the EAC: Making the Most of the Common Market on the Road to a Monetary Union ” in Arusha, Tanzania on October 31–November 1, 2016. Discussions focused on progress in establishing Customs Union and Common Market so far, steps for strengthening them, and the prerequisites for an effective transition to East African Monetary Union (EAMU).
The conference brought together Finance Ministers and Ministers in charge of regional cooperation, Central Bank Governors, other senior policymakers, regional capital markets regulators, academics, civil society, and private sector leaders from across EAC member countries, as well as senior representatives from international financial institutions and other monetary unions. Policymakers of the EAC region reaffirmed their commitment to build a strong economic and monetary union.
Participants assessed the current state and pace of economic integration since the inception of the Customs Union in 2005 and the Common Market in 2010. Participants noted considerable progress towards a single entry visa, processing times at ports, and removal of internal tariffs. As indicated in the second EAC Common Market Scorecard 2016 which evaluates Partner States’ compliance to the free movement of capital, services, and goods, private sector representatives in particular underlined the need for further progress in the areas of non-tariff barriers, rules of origin, tax administration and harmonization, automation of trade process, and labor mobility to facilitate trade of goods and services further. Given experiences in other regions, sequential harmonization could be pursued in implementing the single customs territory and tax harmonization. Accountability and ownership are critical to a successful integration process.
Considerable progress has been made in financial sector integration, including integration of the payment systems and financial markets. In this regard, participants noted still high compliance cost in light of different regulations in member countries. On the Fintech front, however, the EAC region is ahead of many other countries in the world. The importance of proper sequencing and pace of financial integration was stressed in light of risks involved.
Under the theme “The Road toward a Monetary Union,” the status of macroeconomic convergence in the EAC was discussed. Participants acknowledged that fiscal deficits need to be brought down to meet the convergence criterion and to ensure the stability of the future monetary union. Convergence goes beyond headline fiscal deficits and public debt, and fiscal risks need to be monitored closely. Moreover, further progress is needed in data harmonization and monetary policy frameworks and operations, and there is a need to establish the new institutions that will play a key role for the implementation and resilience of the union.
The program, speeches and presentations to the conference are available at:
http://www.imf.org/en/News/Events/Regional-Integration-in-the-EAC .
Following the conference, a forum on “Improvements in East African Statistics Through Capacity Development,” highlighted recent improvements in economic and financial statistics in EAC countries through capacity development initiatives supported by the EAC Secretariat and the IMF.
