In December, the East African Legislative Assembly (EALA) passed a bill establishing the East African Financial Services Commission (EAFSC), one of the key steps on the road to achieving regional monetary union.
The EAFSC will work to harmonise financial services regulation, including in non-banking financial industries such as insurance, pensions, capital markets and microfinance, while promoting regional integration in the sector.
EALA speaker Martin Ngoga said: “This is one of the legacy bills this House has passed. It’s a bill that touches directly on a pillar of our integration. Therefore, we hope that the remaining step to assent by the Heads of State will not be delayed.”
However, the member states of the East African Community (EAC) have yet to decide where to locate the planned new central bank, to be called the East African Monetary Institute (EAMI). A report into the best location suggested somewhere in Tanzania but the conclusions appear to have been rejected by Kenya and Uganda. It is intended that the EAMI will take responsibility for overseeing East Africa’s banking sector before also assuming the role of regional central bank.
At present, most of the EAC institutions, such as the Legislative Assembly, Court of Justice and Competition Authority, are housed in Arusha in northern Tanzania until permanent homes for them are decided. Most member states would like to see a fair agreement on locating them as a whole, rather than ad hoc decisions on individual institutions being made.
At an EAC meeting in December, Burundi’s EAC minister and council of ministers’ chair, Ezekiel Nibigira, said: “In the financial sector, the Community resolved to establish the central bank to perform the job of a central bank, including prudential regulation of the banking sector. The council will decide the country to host the monetary institute, which will ultimately become the EAC central bank, prior to the adoption of a unified currency.”
That it has taken this long to create the EAMI is one of the reasons why the EAC is not on course to introduce a single currency by 2024 as planned, as the EAMI is one of the institutions scheduled to carry out preparatory work for the currency’s introduction.
Creation of two other planned institutions is also behind schedule: The Surveillance, Compliance and Enforcement Commission; and the Statistics Commission.
Published on: African Business
Publication date: 30/01/23