The establishment of an East African monetary Union aimed at a single regional currency that was scheduled to be ready this year looks to be a drawn out affair as the ministry of East African Cooperation says there is need for strong foundation before embarking on its implementation.
Minister for East African Cooperation, Samuel Sitta told the National Assembly yesterday when tabling the ministry’s estimates for the 2012/13 financial year that Tanzania would maintain its position on the need for further preparations on the matter.
“Following our internal analysis and the results of the mentioned regional study tour, Tanzania will consistently emphasise the need to build a strong foundation for a Monetary Union before attempting to start its implementation. Our goal in this regard is to have a sustainable Monetary Union and Community,” the minister affirmed.
Sitta explained that the position emanated from a study tour conducted in Europe in January 2012 by members of a regional high level Task Force in order to gain insights and expand their understanding of the prerequisites and process of establishing a sustainable Monetary Union and well as sources of crisis within the euro zone and measures being taken to solve it.
“EAC has learned from the study tour that to successfully implement a Monetary Union a number of prerequisites must be borne in mind, including the need for the Partner States to attain the qualities of an optimum currency area. This includes free movement of goods, labour and capital plus integration of the financial systems,” he told MPs.
Other prerequisites are that member states must have fully implemented the foundation stages of regional economic integration that include customs Union and a common market to prepare the member states into attaining the qualities of an optimum currency area.
Another important prerequisite according to Sitta is for member countries to be careful in admitting members to a monetary union by verifying their compliance with microeconomic convergence criteria and demonstrate capacity to sustainably observe set targets while operating within the monetary Union.
“It was evident that the real source of the European Monetary Union current crisis was the loose admission of countries on security and defence considerations without giving due consideration to appropriate economic indicators,” the minister noted.
Other important areas to be considered are partner states having in place a harmonised framework for fiscal policy, observe fiscal discipline and a common and enforceable statistical framework.
He said the trend would be the same for establishment of an East African Federation where the member states are advised to focus on effective and beneficial implementation of initial stages of integration before embarking on the process towards a political federation.
On Tanzania’s export earnings from the regional market, Minister Sitta said earnings have been increasing year after year, with 2010 exports earnings increasing by 62.3 percent from $285 million in 2009 to $462 million in 2010 though it declined to $409 million the following year.
Leading exports include fertilizer, cement, rice, steel products, fish, wheat, sugar and textiles. Kenya continues to be the dominant market for Tanzania’s goods in the region accounting for 60.17 percent of the market share, he stated.
The deputy chairman of the Parliamentary Committee for Foreign Affairs, Defence and Security, Mussa Hassan Mussa registered the committee’s concern that the budget analysis for year 2012/13 revealed that 68 percent was allocated for ‘other charges.’ It was spent on the country’s contribution to EAC, he said, noting that this resulted in the poor implementation of ministry’s plans due to lack of money.
The spokesperson of the official opposition, Raya Ibrahim Khamis urged the House to form a Parliamentary Standing Committee for East Africa Cooperation to ensure proper follow-up on several important matters. She urged the government to work on the complaints that Tanzania businessmen in Kenya are being mistreated.
The House passed the EAC Ministry’s estimates amounting to Sh 16.64 billion.