The East African Monetary Unit – the much anticipated EAC single currency – is expected to come into operation 10 years from now. But what lessons can we draw from the ongoing Greek debt sustainability saga? A cartoonist in one of the leading newspapers in the region recently captured the Greek misfortune: Atlas of Greek mythology could bear the burden of the world on his shoulders, only to be crashed by the weight of a Euro coin in the economic tragedy currently playing out in the country. As British newspaper The Guardian dramatically captures it, austerity measures forced on the country over the past five years by its debtors – the European Union, the European Central Bank (ECB) and the International Monetary Fund (IMF) – have sent Greece’s debt hurtling to 180 per cent of GDP, doubled poverty, left a quarter of Greeks and over half of young people without work, raised the suicide and infant mortality rate, while many have been left without healthcare. This has shrunk the economy by a quarter. Greece is literally on its knees, and is seeking a new bailout – the third it is asking for since its debt crisis erupted five years ago. Last month the country became the first developed nation to default on payments to IMF. On account of Greece’s woes, the ECB is naturally experiencing a species of donor fatigue. The situation is such that many observers are of the opinion that after it is all over, the Eurozone will no longer be the same, whatever the outcome in the fervent efforts currently ongoing to bail out – or not bail – the country. We in the region have the luxury of watching the drama from a distance and perhaps learn something from it. In November 2013 the EAC Heads of State signed the protocol on the establishment of the East African Monetary Unit (EAMU). Expected to be finalized by this year, the EAMU Protocol outlines a 10-year roadmap towards a single currency by the year 2024. The single currency is the third pillar of the EAC integration after the Customs Union and the Common Market. Of the three pillars, aside from the other one of political federation, the establishment of the EAC single currency will be the most discernible proof of our integration and inherent promise. A single currency not only eliminates fluctuating exchange rates and exchange costs, but also stabilises and enables the economy to grow. Undergirded by sound economic principles, this is the promise the EAC seeks to reap. The idea is that closer economic ties will lead to closer political ones. Having the same currency means having the same monetary policy, but different countries need different monetary policies. And this is where what is happening in Greece should give us pause for thought. As knowledgeable observers have suggested, imagine, for a moment, that Greece had never adopted the euro, that it had merely fixed the value of the drachma (its former currency) in terms of euros. Basic economics demand that it should let the drachma’s value drop, both to encourage exports and to break out of the cycle of deflation. This is what is happening to our own local currencies at the onslaught of a strong Dollar. The Kenya shilling, for instance, crossed the 100-shilling mark to the US dollar last week, and climbing. The Rwandan franc has been well over 720 to the dollar for some time. The Uganda shilling is no better. We should brace ourselves for tough times in the mean time. But here is the point: If Greece does not get the bail-out it urgently seeks, they will have no choice but to start paying wages and pensions with IOUs, which will become like a parallel currency — and which might soon turn into the new drachma. This could eventually see Greece exit the European Union with the chilling lesson that a common currency may, in the end, offer no respite for countries in trouble. What, then, for the East African Community? Let this be a rhetorical question. And, in the mean time, keep our eyes glued on to the Eurozone saga to see what happens next and, of course, the lessons we can draw.
