EAC strengthens fiscal and monetary policy coordination towards monetary union

ARUSHA, September 29, 2026 — The East African Community [EAC] is reviewing measures to strengthen fiscal and monetary policy coordination as Partner States work towards establishing the East African Monetary Union [EAMU].

The discussions, held in Arusha, Tanzania, from September 21 to 25, focused on improving budget credibility, harmonising tax policies and establishing mechanisms for joint economic assessment, monitoring and accountability.

The meetings began with separate sessions of the Committee on Fiscal Affairs [CFA] and the Economic Affairs and Coordination Subcommittee of the Monetary Affairs Committee [MAC] on September 21 and 22. The two committees subsequently held a joint session from September 23 to 25 to consider issues requiring coordinated action by fiscal authorities and central banks.

Addressing the joint session, EAC Director of Planning Aime Uwase called for practical arrangements to support implementation of the EAMU Protocol and its revised Roadmap.

“The matters before us are central to strengthening monetary and fiscal policy coordination, supporting macroeconomic stability, and advancing our shared regional integration objectives,” Uwase said.

The chairperson of the joint session, Dr Albert Musisi, Commissioner at Uganda’s Ministry of Finance, Planning and Economic Development, called for faster implementation of the EAMU Roadmap to meet the target of introducing a single EAC currency in 2031.

With about five years remaining before the target date, Musisi urged Partner States to adhere to agreed timelines and resolve outstanding issues.

“We therefore need to increase momentum to ensure that we deliver despite the global economic challenges that we are facing,” Musisi said.

The CFA meeting reviewed progress in public financial management reforms, including improvements in forecasting, cash management and expenditure controls aimed at strengthening budget execution and preventing the accumulation of arrears.

The meeting also considered a proposal to establish a Sub-Committee on Public Financial Management Modernisation and Harmonisation to monitor reforms and strengthen follow-up across Partner States.

Tax policy discussions focused on outstanding differences in excise duty rates, Value Added Tax [VAT] harmonisation and tax administration procedures.

The proposals include advancing excise duty harmonisation on a product-by-product basis where consensus has been reached, while continuing consultations on rates that remain unresolved.

The discussions also covered health taxes on tobacco, alcohol and sugar-sweetened beverages, as well as the finalisation of the EAC Multilateral Agreement on Avoidance of Double Taxation. The agreement is intended to simplify cross-border taxation and provide greater certainty for businesses operating in the region.

The Economic Affairs and Coordination Subcommittee considered Kenya’s experience with risk-based credit pricing, an approach intended to improve transparency in lending rates and strengthen their responsiveness to monetary policy decisions.

The meeting also examined the feasibility of synchronising the release of Monetary Policy Statements across Partner States, while taking into account differences in national policy frameworks, data availability and decision-making calendars.

Fiscal discipline and macroeconomic convergence

The joint session considered national timetables for progressively phasing out central bank overdraft facilities, alongside mechanisms for managing temporary government cash shortfalls.

The discussions recognised differences in Partner States’ legal frameworks, fiscal positions and financial markets, while highlighting the need to strengthen cash-flow forecasting and government securities markets to support the transition.

The meeting also reviewed a draft Framework for Coordinating Monetary and Fiscal Policy, which seeks to establish clear institutional responsibilities, regular information sharing and joint assessment of economic developments.

The framework would also provide mechanisms for monitoring agreed actions by Partner States.

The joint session is further developing modalities for Partner States to pay their annual EAC contributions in local currencies.

The move follows the adoption by the 25th Ordinary Summit of EAC Heads of State of a new financing formula, which took effect on July 1, 2026.

Under the formula, 50 per cent of contributions will comprise equal contributions from Partner States, while the remaining 50 per cent will be based on assessed contributions calculated using each Partner State’s average Gross Domestic Product [GDP] per capita over the preceding five years.

The discussions on local-currency payments are covering exchange-rate references, valuation and settlement arrangements, as well as the management of foreign-exchange risks.

Uwase said the arrangements were expected to “improve timely disbursement of contributions and support smoother budget execution”.

The joint session is also developing terms of reference for a peer-review mechanism to assess progress towards macroeconomic convergence, identify emerging risks and track corrective actions.

The mechanism follows the 29th MAC meeting held in July 2026, which noted that no Partner State had met all four primary convergence criteria.

The meeting called for stronger policy coordination, reinforced peer review and faster implementation of national convergence programmes.

Under the EAMU convergence criteria, Partner States are required to maintain headline inflation at no more than 8 per cent, foreign reserve cover of at least 4.5 months of imports, an overall fiscal deficit including grants of no more than 3 per cent of GDP, and gross public debt of no more than 50 per cent of GDP in net present value terms.

The outcomes of the joint session will inform recommendations for consideration and follow-up by the relevant EAC policy organs.

https://thecooperator.news/eac-moves-to-fast-track-regional-capital-markets-integration/

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