Friday, July 17, 2009



16th July, 2009
By David Mugabe

THE Central bank governor, Tumusiime Mutebile and his East African Community (EAC) counterparts have disagreed on the amount of foreign reserves member states should maintain. This comes as the region moves towards a single currency.

Reports from the Bank of Uganda indicate that currently, the country has reserves to cover between four to five months of imports.

Kenya’s Business Daily reported recently that the differences between the central bank chiefs originates from the each country’s interpretation of the regional monetary policy that requires each country to have reserves to cover at least six months of imports. However, not all the members have this level of reserves.

The newspaper said Rwanda’s Francois Kanimba agreed with Uganda, arguing that monetary authorities in the region had agreed to the build-up before 2012 as part of preparations to having a monetary union.

According to the EAC federation roadmap, the five states are meant to have a single currency by 2012. This, it is believed, would offset the volatility in exchange transactions.

Last year, Ugandans lost a lot of money during the Safaricom initial public offer in which after buying shares at a higher Kenyan shilling exchange rate, they got their refund at a lower rate.

A common currency would also make everyday transactions easier.
The monetary union is to follow the implementation of the common market expected next year and a political federation later.

The Business Daily also indicated that official usable foreign exchange reserves held by the Kenya Central Bank declined from $3.3b equivalent to 4.6 months of imports to $3.04b or 3.5 months of import cover in the year ended July 10. This means the country would need another $2.2b to meet the half-year import criterion. It is predicted that Kenya would require $52.4m per