East African Payment System critical in integration
East African Community member countries of Kenya, Tanzania and Uganda have so long been urged to look into their financial services sector’s regulatory policies to support the region’s economic integration stressing the opportunities arising from this integration cannot be realized without the financial services sector’s strong backing. Effective this month, the three leading economies in EAC members trading is expected to improve significantly after the launch of a new payment system known as East Africa Payment System which will interconnect the three East African economies and enhance efficiency. Under the new system, traders can pay for goods in any of the three region’s currencies without necessarily changing them into a customer’s preferred mode of payment. Rwanda and Burundi are also expected to join the system in the near future. The system is part of larger plan by the East African Community partner States to integrate their money and capital markets that has been under development for three years.
The reality is that opportunities arising from the East African region’s integration cannot be realized without the financial services support because the region’s financial stability opens a lot of opportunities especially for the banking sector. East African Community as a region is growing ahead of other regions but there are difficulties in each country because of the different level of economic development although every member country is growing. Economic integration is not easy because of the different level of economic development in each of the East African countries and there is no way they cannot be talking on the same page. Having been to all East African countries, the growth in the financial sector is not that commensurate to the entire growth of the region. Thus, East African Community bureaucrats are working out to sign the revised regional framework agreement on different services. To ensure financial stability, the technocrats in the region have always stressed the need to look at the region on a country per country basis. There is no doubt that East African financial services countries can initially start a reciprocity protocol for each other. In terms of the capital market, the stock exchange link-up among Kenya, Uganda and Tanzania has been a welcome move. Other East African countries are also coming into the regional exchange including the Rwanda and hopefully the EAC’s backwater Burundi in the future.
Part of the region’s initiative is the establishment of Infrastructure fund and Infrastructure Investment Bank, which many hope could hopefully usher in more investments into the region. However, some financial sectors are not yet ready like the bond market. Key players have also downplayed any political and business risks in the region describing them as negligible. EAC Countries have been implementing some reforms and preparing the economy for the region’s integration. In Uganda, the government has instituted some measures to ensure good macroeconomic fundamentals. Its investments have been growing more than three times. Kenya and Tanzania on their parts have plans to reduce their budget deficit and expect a balanced budget by 2018. The two have really benefitted from the trade liberalization in East African Community and the two are now trading more than what it used to be before the revival of East African Community more than fifteen years ago.