The East African Community (EAC) needs to build its capacity to produce robust statistics as well as create credible surveillance and enforcement mechanism to underpin its transition to a monetary union.
This was said in a workshop on harmonising fiscal and budgetary frameworks on Wednesday in Arusha.
Convened by the EAC in partnership with the Fiscal Affairs Department of the International Monetary Fund (IMF) the workshop over the past three days discussed variety of subjects focusing on fiscal policy implications for the planned East African Monetary Union (EAMU).
A press statement issued by the EAC quoted its director for planning, Tharcisse Kadede, as outlining production of robust statistics as key, saying it aids the measurement of the extent to which macroeconomic convergence is attained.
He added that the creation of a credible surveillance and enforcement mechanism, as well as a device for resilience against external shocks, including a stabilisation facility, are critical for the smooth functioning of a monetary union.
Also included among the proposals is the harmonisation of tax policies and customs procedures, development of a common fiscal reporting framework for EAMU and development of an EAC budget framework directive and a model Public Finance Management (PFM) Act.
The workshop is part of a three-year collaborative initiative through which the IMF will support activities to establish the fiscal foundations for the East African Monetary Union.
According to a statement issued, the initiative is divided into four work streams—namely technical specification of EAMU fiscal convergence criteria and rules, development of a common fiscal reporting framework for EAMU, model and supporting EAC-wide accounting and reporting harmonisation programme
Others are, development of an EAC national budget frameworks directive, model PFM Act, and supporting EAC-wide PFM improvement programme and development of a fiscal coordination, surveillance and enforcement mechanism, including mechanisms for coordination of regional fiscal and monetary policy.
The process for the establishment of the East African Monetary Union is underpinned by Articles 5 and 82 of the EAC Treaty where, among others, the Partner States undertake to establish a monetary union and to co-operate in monetary and fiscal matters.
At their 14th summit held on November 30, 2012, the EAC heads of state directed the Council of Ministers to expedite negotiations towards the conclusion of the Monetary Union Protocol and report progress at the 12th extraordinary summit, with a view to signing the protocol at the 15th ordinary summit expected to take place in November this year.
By embracing a single currency, EAC Partner States would remove the costs of having to transact in different currencies and the risk of adverse exchange rate movements for traders and travellers alike within the region.