The leaders of five East African countries signed a protocol on Saturday laying the groundwork for a monetary union within 10 years that they expect will expand regional trade.
Heads of state of Kenya,Tanzania,Uganda,Rwanda and Burundi,which have already signed a common market and a single customs union,say the protocol will allow them to progressively converge their currencies and increase commerce.
In the run-up to achieving a common currency,the East African Community (EAC) nations aim to harmonise monetary and fiscal policies and establish a common central bank. Kenya,Uganda,Tanzania and Rwanda already present their budgets simultaneously every June.
The plan by the region of about 135 million people,a new frontier for oil and gas exploration,is also meant to draw foreign investment and wean EAC countries off external aid.
Businesses will find more freedom to trade and invest more widely,and foreign investors will find additional,irresistible reasons to pitch tent in our region, said Kenyas President Uhuru Kenyatta. Kenya is the biggest economy in east Africa.
Kenyatta,who is due to face trial at the International Criminal Court on crimes against humanity charges in February,took over the chairmanship of the bloc from Ugandan President Yoweri Museveni,hosting the summit.
Kenya has launched a $13.8 billion Chinese-built railway,part of regional plans that also include building new ports and railways.
Landlocked Uganda and Kenya have discovered oil,while Tanzania has vast natural gas reserves,which require improved infrastructure and foreign investment so they can be exploited.
Tanzania,where the blocs secretariat is based,has complained that it has been sidelined in discussions to plan these projects,but Kenyatta said the EAC was still united.
Kenneth Kitariko,chief executive officer at African Alliance Uganda,an investment advisory firm,said the monetary union would boost efficiency in the regions economy estimated at about $85 billion in combined gross domestic product.
Adjusting to a single monetary and exchange rate policy is an inescapable feature of monetary union … but this will take time and may be painful for some, he said.