EAC makes progress on financial sector integration

DAILY NEWS Reporter

EAST African Community (EAC) has made considerable progress on payment systems and financial markets integration.

However, participants on the high level conference concluded in Arusha on Tuesday 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.

The conference was jointly organised by the EAC Secretariat, the European Union (EU), and the International Monetary Fund (IMF) entitled ‘Regional Integration in the EAC: Making the Most of the Common Market on the Road to a ‘Monetary Union’ in Arusha. 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.

Moreover, further progress is needed in data harmonisation 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. EAC region policymakers reaffirmed their commitment to build a strong economic and monetary union.

Participants assessed the current state and pace of economic integration and 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 harmonisation, automation of trade process, and labour mobility to facilitate trade of goods and services further.

Given experiences in other regions, sequential harmonisation could be pursued in implementing the single customs territory and tax harmonisation. Accountability and ownership are critical to a successful integration process.