STAR LEADER: Common EAC currency will be a disaster LAST week Charles Njonjo argued in the newspapers that Kenya was bogged down by the weakness of Uganda and Tanzania before 1977. Njonjo is wrong. The revived East African Community will definitely be good for Kenya. As the largest and most sophisticated economy, Kenya will be able to export more goods and services to member states if trade barriers are removed. However there is one area where Njonjo is right to sound a warning. Last week in Arusha member states adopted a draft protocol for a common East African currency. A common currency is a terrible idea. Kenya will be the biggest economy and will have to shoulder the burden if a smaller country overspends. Greece went on a spending spree after it joined the euro. But when global recession came, Germany had to bail out Greece. If the East African shilling returns, Uganda or Tanzania can exceed their budget targets, cause inflation and depreciate the value of the shilling. As the biggest economy, Kenya will have to stabilise the currency. East Africa is yet to fully remove barriers to the movement of goods, services and labour because of closet protectionism. How can it possibly manage a common currency?
Posted on: Mon, 22 Jul 2013 07:58:26 +0000
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