8. Facts and Prospects of Monetary Union in East Africa

This chapter shows how the East African Monetary Union can be successful and sustainable. We examine the structural attributes of the East African Community member countries that can potentially affect the progress of the monetary union. We use data provided by the World Bank and review some reports and journal articles to demonstrate the lack of convergence in some macroeconomic variables among member states. To be more specific, structural similarities are only exhibited with inflation but, countries diverge, among other things, in exchange rates, interest rates, banking, public debt sizes, and trade. We end the chapter by recommending that East African Monetary Union member states work toward harmonizing monetary and fiscal policies and increasing their collaboration in other macroeconomic indicators like trade and debt management.