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African Development Bank urges COMESA to adopt single currency
A new report by the African Development Bank (AfDB) has proposed uniform fiscal and macro-economic policies in the 19 states of Eastern and Southern Africa even as they grapple with multiple trade tax structures and overlapping memberships.
The report which was made public last week, reveals that the AfDB calls for an economic policy convergence to boost fiscal surveillance at the regional and national levels so as to set the stage for a monetary union in the Common Market for Eastern and Southern Africa (COMESA) region – a move that is seen as a stepping stone in cementing regional economic growth.
“Fiscal convergence is essential to COMESA’s macroeconomic convergence programme, and is a bridge between monetary and trade integration programmes,” AfDB president Donald Kaberuka said in the report.
The report, Facilitating Multilateral Fiscal Surveillance in Monetary Union Context with Focus on Comesa Region, was commissioned by the COMESA Secretariat two years ago. It proposes a roadmap for fiscal convergence in a program that runs up to 2018 but offers no specifics that can connect the dots between trade and monetary integration.
Under the monetary union, the 19 member-states are expected to come up with a single currency, eliminating the current exchange headache. This may however prove to be a long shot. The 19 countries have overlapping memberships. This is expected to put fiscal and macroeconomic convergence to the test as the two blocs pursue different priorities, being as they are at different stages of integration.
COMESA launched its Customs Union in 2009 but slow implementation of common external tariff structures has seen member states get into numerous trade disputes with firms in the region. But despite slow integration, the push to integrate COMESA members’ macro-economic policies is buoyed by the high number of specialized institutions that it has set up especially after the launch of the free trade area in 1994.
These include the PTA Bank and PTA Reinsurance companies both headquartered in Nairobi, the Khartoum-based regional Court of Justice, a clearing house based in Harare, and the Regional Investment Agency (RIA) in Cairo.
