By James Anyanzwa
The East African central banks are working on a framework to facilitate currency convertibility – the ease with which a country’s currency can be converted into another currency, to spur intra-regional trade.
The move is part of the efforts towards the creation of a monetary union whose protocol is yet to be agreed upon.
Central Bank Governor Njuguna Ndung’u said implementation of currency convertibility system would boost regional trade and drive regional economies. “We would like to come up with convertibility of currency in order to facilitate trade. If we increase convertibility of currency then we are going to increase trade
He however pointed out that regional central banks ought to have reciprocal accounts that hold other countries’ currencies. “Central banks should have reciprocal accounts,” Ndung’u told participants at a financial services conference in Nairobi yesterday.
Inconvertible currencies pose a risk and barrier to trade with foreigners who have no need for the domestic currency. Ndung’u noted that the region’s central banks are also working on modalities of convergence in terms of payment systems and supervision.
The negotiations for a protocol for a monetary union were expected to start this year. Once concluded, the East African Community member states should have a single currency and single central bank.
A deal on a regional currency is yet to be hammered, despite the deadline for the formation of the East African Monetary Union being too close.