The East African Community (EAC) is reviewing measures to strengthen public finance management and monetary policy coordination as Partner States prepare for the East African Monetary Union (EAMU). Discussions focus on improving budget credibility, aligning tax policies, and establishing practical arrangements for joint economic assessment and accountability. The meetings, held in Arusha, Tanzania, from 21st to 25th September 2026, involve the Committee on Fiscal Affairs (CFA) and the Economic Affairs and Coordination Subcommittee of the Monetary Affairs Committee (MAC).
EAC Director of Planning, Aime Uwase, emphasized the importance of practical arrangements to support the implementation of the EAMU Protocol and revised Roadmap. He noted that the matters discussed are central to strengthening monetary and fiscal policy coordination, supporting macroeconomic stability, and advancing regional integration objectives. The Chairperson, Dr. Albert Musisi, urged members to work towards agreed timelines and reach agreement on the issues before the Joint Session to meet the 2031 target.
The Committee on Fiscal Affairs (CFA) meeting covered progress in public financial management reforms, including stronger forecasting, cash management, and expenditure controls. A proposed Sub-Committee on Public Financial Management Modernization and Harmonization will monitor reforms and strengthen follow-up across Partner States. Tax discussions focused on outstanding differences in excise duty rates, Value Added Tax (VAT) harmonization, and administrative tax procedures.
The Economic Affairs and Coordination Subcommittee discussed Kenya's experience with risk-based credit pricing, which seeks to improve transparency in lending rates and their responsiveness to monetary policy decisions. The meeting also examined the feasibility of synchronizing the release of Monetary Policy Statements across Partner States. Joint action on fiscal discipline and macroeconomic convergence is being considered.
The Joint Session is considering national timetables for progressively phasing out central bank overdraft facilities, alongside mechanisms to manage temporary government cash shortfalls. A draft Framework for Coordinating Monetary and Fiscal Policy is under review, seeking to establish clear institutional responsibilities, regular information sharing, and joint assessment of economic developments.
The discussions also cover modalities for Partner States to pay their annual EAC contributions in local currencies, following the adoption of a new financing formula effective from 1st July 2026. The formula comprises 50 percent equal contributions and 50 percent assessed contributions, based on each Partner State's average Gross Domestic Product (GDP) per capita over the preceding five years.
The Joint Session is developing terms of reference for a peer review mechanism to assess progress towards macroeconomic convergence, identify emerging risks, and track corrective actions. The primary criteria for macroeconomic convergence require headline inflation of no more than 8 percent, foreign reserve cover of at least 4.5 months of imports, an overall fiscal deficit of no more than 3 percent of GDP, and Gross Public Debt of no more than 50 percent of GDP.
Key points
- The East African Community targets 2031 for a monetary union and is considering a joint central bank.
- The EAC is reviewing measures to strengthen public finance management and monetary policy coordination.
- A new financing formula for EAC contributions is in effect, comprising equal and assessed contributions based on GDP per capita.
