Eurozone crisis places monetary union in doubt

Member states have until August 21 to come up with draft legislation that will enable gradual harmonization with the East Africa Common Market Protocol.

This exercise is expected to take at least five years, meaning that proper discussions on the monetary union may not start until 2015.

Mr Nalo, however, said the East Africa region already enjoys the advantage of trade in a currency bearing the same name ‘Shillings’ and the member countries have a liberalized foreign exchange regime.

All member countries require a major audit of their laws governing the financial sector.

A recent one conducted in Kenya showed that there is a serious disparity between the national laws and those of the East Africa Common Market Protocol.

For example, there are no provisions on how workers will pay their social security dues or benefit from them if they are not working in their home countries.

Integration

Earlier Kenya and Uganda negotiators for regional integration had urged that the legal requirements of a full transfer of monetary sovereignty to the regional level carry the danger of exposing their countries’ financial sectors to external shocks.

An earlier report on the creation of a monetary union by the European Central Bank had suggested two strategies for the achievement of the union; in the first option, the monetary union would be kept as an aim with no firm public time-frame until all prerequisites appear to be within reach.

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