A regional private sector lobby has called for the fast-tracking of the regional monetary union to reduce traders' dependency on foreign currencies.
The East African Business Council (EABC) has cited the dependence on foreign currencies, particularly the dollar as one of the impediments to intra-East African Community (EAC) trade.
A regional monetary union is expected to provide traders with a smooth trading platform as they will have a payment settlement system that would allow them to trade using their local currencies.
The plan for the monetary union is also expected to have the EAC partner States adopt a single currency to facilitate cross-border trade. EABC in its latest policy brief notes that the US dollar shortage has exacerbated the situation even as it added a high cost of doing business and industry protectionism traits among Partner States as the other setbacks.
The EABC Brief on Intra-EAC and Investments 2018-2022 shows trade within Partner States has remained low, at 15 per cent for the last three years ending December 2022.
It also documents a decline in services exports in the region, noting that EAC economies were still rebounding from the pandemic effects and the war in Ukraine.
"However, exports rebounded in 2021, with Kenya (24 per cent), Rwanda (11 per cent), Tanzania (47 per cent) and Uganda (52 per cent) all registering double-digit growth rates in services exports in 2021," the EABC brief reads.
EABC says the admission of the Democratic Republic of Congo into the bloc last year has boosted intraregional trade and enhanced trade facilitation initiatives, including the removal of non-tariff barriers (257 since 2007) and harmonisation of 2,568 East African standards.
According to the brief, EAC's total trade increased by 13.4 per cent to $74.03 billion (Sh11.1 trillion) in 2022 from $65.27 billion (Sh9.7 trillion) in 2021. "Share of Intra-EAC trade remains low at 15 per cent in 2022 due to, among others, the imposition of Non-Tariff Barriers (NTBs) by Partner States," says the lobby.
"The persistence of NTBs continued to negatively affect intra-EAC trade." One such NTB is the dependence of EAC partner States using the US dollar as the "official" trading currency in the region.