The African Development Bank (AfDB) has called for uniform fiscal and macro-economic policies in the 19 states of the eastern and southern Africa bloc.
AfDB says, this move will boost fiscal surveillance at the regional and national levels. It will also set the stage for a monetary union.
“Fiscal convergence is essential to Comesa’s macroeconomic convergence programme, and is a bridge between monetary and trade integration programmes,” AfDB President Donald Kaberuka said in a report, titled “Facilitating Multilateral Fiscal Surveillance in Monetary Union Context with Focus on Comesa Region.”
The report which was made public last week, had been commissioned by the Comesa Secretariat two years ago.
The report proposed establishment of a single currency for the Comesa region, a move that is seen as a stepping stone in cementing regional economic growth.
By 2015, the report says the 19 countries are supposed to maintain an overall budget deficit to GDP ratio of 4%, an annual average inflation rate of not more than 3%, and keep external reserves of at least five months of imports.
It also recommended that the countries should have eliminated central bank financing of budget deficits over the same period.
However, Prof. Manasseh Nshuti, Rwanda’s former Finance and Economic Planning Minister said, though the single currency initiative is important, this is not the right time to propose it.
He said a strong financial independence of member countries should first be sought.
“We need to have harmonized fiscal regimes and we still have other outstanding issues like corruption, lack of transparency and different inflation rates, meaning that it might be difficult for the member countries to sort these issues,” he said.