World of Coins

Modern coins, pseudo coins and trade tokens of other continents => Sub-Saharan Africa => East Africa => Topic started by: Bimat on October 29, 2011, 07:16:27 PM

Title: Common East African Currency Planned
Post by: Bimat on October 29, 2011, 07:16:27 PM
Negotiations for East African Monetary Union on next week

ARUSHA, Tanzania, October 28, 2011/African Press Organization (APO)/

[...]

The Task Force will also negotiate provisions on the name and status of the single currency envisaged for the EAC, as well as provisions on the determination of conversion rates, conversion and redenomination of existing legal instruments and bank notes and coins to be issued by the proposed East African Central Bank (EACB).

After the Customs Union and the Common Market, the Monetary Union is the third stage in the integration process of the EAC bloc, which ultimately aspires to a Political Federation. The EAC Summit of Heads of State has set a 2012 deadline for the achievement of the Monetary Union, and EAC Secretary General Amb. Richard Sezibera has on different occasions reiterated EAC's commitment to have the Monetary Union Protocol concluded within the set timeline.

Deputy Secretary General Dr. Bukuku on his part notes that the Monetary Union will help mitigate price instability and exchange rate volatility in the region, which would be a boon for businesses and ultimately promote investment and spur development.

[...]

Determination of Conversion Rates (Article 37)

Conversion rates would need to be fixed by a binding act in order to benefit from general application. The process should involve the proposed institution to undertake such preparatory work or the EACB itself, as appropriate. The fixing of the conversion rates should be on the basis of prevailing exchange rate relationships since it would be difficult to use this occasion for a final realignment.

[...]

Bank Notes and Coins (Article 39)

This provision would confer sole legal tender status on the banknotes and coins issued by the EACB and would entitle the Community to set a date by which banknotes and coins in the legacy currencies would cease to be legal tender in the single currency area. The Partner States would be committed to ensuring adequate sanctions against counterfeiting and falsification of the banknotes and coins of the EACB.

[...]

Source: Star Africa (http://www.starafrica.com/en/news/detail-news/view/negotiations-for-east-african-monetary-u-199118.html)
Title: Re: Common East African Currency Planned
Post by: chrisild on December 01, 2013, 12:03:16 PM
The governments of five East African countries have just signed an agreement about a customs union (probably as from next year) and a common currency, to be introduced within the next years, by 2023 maybe. The Heads of state/government from Burundi, Kenya, Rwanda, Tanzania und Uganda - countries that already cooperate in the East African Community (EAC) - agreed on those plans at the EAC summit conference in Kampala yesterday.

Here is a news article in German ...
http://www.tagesschau.de/ausland/ostafrika-waehrung100.html

... and this is the official communiqué in English (all caps ...) as a PDF download:
http://www.eac.int/news/index.php?option=com_docman&task=doc_download&gid=353&Itemid=73

Christian
Title: Re: Common East African Currency Planned
Post by: chrisild on December 01, 2013, 02:02:49 PM
Two articles in English:

East Africa Takes Step Toward Single Currency
http://online.wsj.com/news/articles/SB10001424052702303332904579230004056818752
(longer, but apparently behind a paywall)

Five east African countries agree to common currency
http://www.iol.co.za/business/news/five-east-african-countries-agree-to-common-currency-1.1614939
(shorter but accessible)

Christian
Title: Re: Common East African Currency Planned
Post by: Enlil on December 01, 2013, 10:16:46 PM
They have been going on about this for a few years now, I doubt it will happen. Thanks for the post anyway.
Title: Re: Common East African Currency Planned
Post by: Figleaf on December 01, 2013, 11:53:29 PM
People always underestimate how much trust and co-operation a customs union takes. They haven't a clue how much willingness to give up national sovereignty it takes to create a voluntary, self-adminstered common currency. They are with their hands deep into the ground when it comes to realising how fast corruption can undermine both. They look at the benefits and disregard the requirements.

Peter
Title: Re: Common East African Currency Planned
Post by: augsburger on December 03, 2013, 10:50:19 AM
There have been other currency unions in Africa right? How have they worked out?
Title: Re: Common East African Currency Planned
Post by: Figleaf on December 03, 2013, 12:00:23 PM
Yes, the CFA franc (https://en.wikipedia.org/wiki/CFA_franc), which still works because France pays the cost and runs the system. Note the words "voluntary" and "self-administered" in my reaction above.

Peter
Title: Re: Common East African Currency Planned
Post by: Ukrainii Pyat on December 03, 2013, 02:49:55 PM
There has been discussion in Arabian/Persian Gulf region of currency union - I think is not likely to happen soon, but more likely than E. Africa.

Because of France supporting the CFA - it is pegged to the Euro.  It prevents the inflation that would otherwise result from these countries issuing their own currency like toilet tissue to pay for their leaders extravagances.  Think Zimbabwe.
Title: Re: Common East African Currency Planned
Post by: chrisild on December 03, 2013, 03:32:25 PM
While I don't think it is fair to equate every BEAC and BCEAO country with the extreme case of Zimbabwe, the current CFA "setup" is far from being a currency union. Some critics even say it is a continuation of the colonial system (German Wikipedia (https://de.wikipedia.org/wiki/CFA-Franc-Zone#Kritik_am_CFA-Finanzsystem) link). The East African currency would, at least according to the EAC plans, not be dollarized or pegged to any other currency. Now whether it becomes reality ...

Christian
Title: Re: Common East African Currency Planned
Post by: augsburger on December 03, 2013, 03:59:05 PM
How have these countries fared with inflation and economic problems? You'd think that only countries that are economically stable would consider this, and economically stable countries would never, ever consider letting in unstable countries like, say, Greece into the same currency union as them.
Title: Re: Common East African Currency Planned
Post by: chrisild on December 03, 2013, 04:28:51 PM
As pointed out in the initial message, the five do not plan to introduce a common currency tomorrow but in ten years. Whether it will work by then, or later, or never ... we'll see. ;) And assessments are always difficult, especially when a government that wants to get in is supported by creative accounting (http://www.spiegel.de/international/europe/greek-debt-crisis-how-goldman-sachs-helped-greece-to-mask-its-true-debt-a-676634.html) experts. Whether Goldman Sachs or some other investment services company would play a similar role in the case of East Africa, can only be guessed either. Even the customs union, to be set up next year, sounds quite ambitious ...

Christian
Title: Re: Common East African Currency Planned
Post by: Figleaf on December 03, 2013, 05:05:47 PM
You are projecting the euro on the CFA franc, which is dead wrong. These are simple and very small economies, completely dependent on the world economic climate and the price of the agricultural goods they produce most. Unemployment is so high it doesn't count as an economic goal any more. The inflation rate is stable, but growth depends on exports and domestic violence. If you need a battery of economic experts, mostly disagreeing, to steer the EUR, GBP, USD or JPY economy, you might control the CFA-franc economies with one highschool economics teacher if there weren't mouths to feed and enemies to beat back.

The whole system is an artificial mechanism controlled from Paris, where all the big cheques are payable. The minister of finance is a relative of the president. He and the president are pampered, while the minister's advisor is a civil servant from Paris, who takes the decisions. The exchange rate is fixed, the interest rate (and, some say, the inflation rate) is set in Paris. The army doesn't get a bloated budget, also because the foreign legion sees to it that the right guy remains president. I am exaggerating, but not by all that much.

The results are marginal. Ivory Coast used to be one of the best performing countries in Africa when Houphouet-Boigny was dictator. It drifts along with the rest now. Mali used to be one of the poorest countries on earth. Part of it does better now, because South American drugs smugglers use it as a staging point for flying drugs into Southern European countries. Another part is devastated by extremist islamist who have escaped from Libya, touaregs at odds with the rest of the world and the French army, driving both out. Sort of.

At best, the system has not contributed to the common African vicious cycle of revolts and tribal conflicts, letting all important clans get rich in turn so their clan elders can retire somewhere outside Africa. It may have prevented excessive killing sprees. At worst, it is preventing nominally independent countries from finding their own way. It is neither a success, nor a failure. Just not a solution.

Peter
Title: Re: Common East African Currency Planned
Post by: Ukrainii Pyat on December 04, 2013, 01:06:46 PM
You are projecting the euro on the CFA franc, which is dead wrong. These are simple and very small economies, completely dependent on the world economic climate and the price of the agricultural goods they produce most. Unemployment is so high it doesn't count as an economic goal any more. The inflation rate is stable, but growth depends on exports and domestic violence. If you need a battery of economic experts, mostly disagreeing, to steer the EUR, GBP, USD or JPY economy, you might control the CFA-franc economies with one highschool economics teacher if there weren't mouths to feed and enemies to beat back.

The whole system is an artificial mechanism controlled from Paris, where all the big cheques are payable. The minister of finance is a relative of the president. He and the president are pampered, while the minister's advisor is a civil servant from Paris, who takes the decisions. The exchange rate is fixed, the interest rate (and, some say, the inflation rate) is set in Paris. The army doesn't get a bloated budget, also because the foreign legion sees to it that the right guy remains president. I am exaggerating, but not by all that much.

The results are marginal. Ivory Coast used to be one of the best performing countries in Africa when Houphouet-Boigny was dictator. It drifts along with the rest now. Mali used to be one of the poorest countries on earth. Part of it does better now, because South American drugs smugglers use it as a staging point for flying drugs into Southern European countries. Another part is devastated by extremist islamist who have escaped from Libya, touaregs at odds with the rest of the world and the French army, driving both out. Sort of.

At best, the system has not contributed to the common African vicious cycle of revolts and tribal conflicts, letting all important clans get rich in turn so their clan elders can retire somewhere outside Africa. It may have prevented excessive killing sprees. At worst, it is preventing nominally independent countries from finding their own way. It is neither a success, nor a failure. Just not a solution.

Peter

The CFA Franc is pegged to the Euro at a fixed rate of exchange - in effect it is a guaranty of value.  Other than that small point I agree with the rest of what you say.  I find it sort of difficult to not see it as an extension of colonial practice, particularly so since all of these countries have now been otherwise independent for more than half a century.  Mali did leave the CFA franc for awhile, but then went back in the early 1980s.
Title: Re: Common East African Currency Planned
Post by: Figleaf on December 04, 2013, 01:13:21 PM
Not quite. The CFA franc's peg is not supported by the ECB, but by the Banque de France. If there is ever any trouble, BdF pays, lends, sends in experts etc.. There is even treaty language somewhere that says France can use the euro on the understanding that Paris guarantees that the ECB is not liable in any way for the currencies of former French colonies.

Peter
Title: Re: Common East African Currency Planned
Post by: Enlil on December 24, 2013, 12:02:20 AM
The best African currencies would be the Botswanan Pula and South African Rand, but am not sure about their total independence and reliability on the one section of the economy, that be mining.
Title: Re: Common East African Currency Planned
Post by: Pabitra on December 24, 2013, 06:18:02 AM
There have been other currency unions in Africa right? How have they worked out?

Apart from Central Africa, there is West African Currency union too.
I do not think it is subsidised by any country.

A subsidised currency leads to migration of capital and keeps the subsidised economy dependent in perpetuity.
Title: Re: Common East African Currency Planned
Post by: Figleaf on December 24, 2013, 09:17:25 AM
Not sure which plan (there are several) you are referring to. If it is this one (https://en.wikipedia.org/wiki/Economic_Community_of_West_African_States#West_African_Monetary_Zone) I am willing to bet you a bottle of champagne that the eco will not be introduced in 2015. :)

Peter
Title: Re: Common East African Currency Planned
Post by: Pabitra on December 24, 2013, 02:24:51 PM
Dear friend Peter,
Despite having been a civil servant, perhaps longer than you ( will complete 37 years in April ), I am yet to develop a global outlook like you.

I have no knowledge of what a union might mean in terms of customs, preferential tariffs, monetary policies, linguistic and political unification or other higher order things.

My simple definition in context of present platform ( World of Coins ) is that Central Africa Currency Zone and West Africa currency zone have their coins circulating all over their zone.

The images are enclosed.

Source: Handbook of Current Circulating Coins of the World ( August 1, 2013)

PS: You save your Champagne bottle since I am off alcohol since January 2000, on medical advice. You could share it other members of WoC and raise a toast for me :-) 
Title: Re: Common East African Currency Planned
Post by: <k> on December 24, 2013, 02:41:36 PM
What's even more amazing is the area that those two currency zones cover, Pabitra. And what's even more amazing than that is that the two different francs are pegged to one another in value. So to all intents and purposes, the two form a single de facto currency zone.
 
(http://upload.wikimedia.org/wikipedia/commons/thumb/c/c6/CFA_Franc_map.svg/609px-CFA_Franc_map.svg.png)
Title: Re: Common East African Currency Planned
Post by: Figleaf on December 24, 2013, 03:39:40 PM
@Pabitra: can't beat 37 years :) Logged 22 years only.

@<k>: Not all that amazing. Both use the CFA franc. What is amazing is that the areas were never merged.

Peter
Title: Re: Common East African Currency Planned
Post by: <k> on December 24, 2013, 04:08:43 PM
@<k>: Not all that amazing. Both use the CFA franc. What is amazing is that the areas were never merged.

Peter

Yes, apparently each of the areas has its own central bank.
Title: Re: Common East African Currency Planned
Post by: chrisild on December 24, 2013, 04:12:44 PM
What is amazing is that the areas were never merged.

Odd but not amazing. ;) I suppose it has something to do with political control. After all the Banque de France dominates the the two CFA franc zones, and from what I have read, the two (BEAC and BCEAO franc) are not convertible ...

Christian
Title: Re: Common East African Currency Planned
Post by: eurocoin on January 09, 2019, 04:42:51 PM
This topic was last updated in 2013 but is still relevant. Although a target date was originally set for 2012, there is currently still being worked on the project. The launch of the common currency is not yet in sight. Its introduction is now planned for 2024 although they have already mentioned the launch could be postponed again. In 2013 the then 5 countries of the East African Community signed an agreement to work towards the East African Monetary Union (EAMU). These are Burundi, Kenya, Rwanda,Tanzania and Uganda. Since the agreement was signed, South Sudan has now also become a member of the East African Community but it remains unclear if it will also join the EAMU. The project is currently being threatened by unending bickering between Rwanda and Burundi and trade friction between Kenya and Tanzania. Countries have to comply with the convergency criteria for at least 3 consecutive years meaning that in 2021 we will know which countries are ready to become part of the monetary union. Currently none of the countries meets all of the criteria.
Title: Re: Common East African Currency Planned
Post by: Figleaf on January 09, 2019, 06:14:58 PM
See reply #16. I am still calling the Eco humbug. If anyone wants to bet, the bottle of champagne is still saying the Eco (see Wikipedia (https://en.wikipedia.org/wiki/Eco_(currency))) won't exist in 2020, 2021 and 2024.

Peter
Title: Re: Common East African Currency Planned
Post by: eurocoin on January 09, 2019, 07:06:41 PM
See reply #16. I am still calling the Eco humbug. If anyone wants to bet, the bottle of champagne is still saying the Eco (see Wikipedia (https://en.wikipedia.org/wiki/Eco_(currency))) won't exist in 2020, 2021 and 2024.

Peter

While I agree with you that none of these projects are likely to materialize, keep in mind that there are 2 separate projects for local currency unions. One in East Africa which is featured in this topic which is planned to be issued in 2024 with a yet to be determined name and one in West Africa (http://www.worldofcoins.eu/forum/index.php/topic,40884.0.html) with the concept name Eco and planned to be introduced in 2020.