Monetary Union


The East African Community (EAC) Political Federation, the fourth pillar and ultimate stage of the EAC integration agenda, has seen both progress and challenges over the past 25 years. This initiative aims to integrate the EAC Partner States into a single federated political entity to enhance regional stability, facilitate cooperation, and create a unified voice on the global stage. 
 

Historical Background

The idea of political federation in East Africa dates back to the first EAC, formed in 1967 between Kenya, Uganda, and Tanzania. Building on shared colonial history and close economic and social ties, the original EAC had an ambitious goal to establish a federation. However, ideological differences, national interests, and political tensions led to the collapse of the EAC in 1977.
 
In 1999, the signing of the Treaty for the Establishment of the East African Community marked a rebirth of regional integration, with Kenya, Uganda, and Tanzania as initial members. By 2000, these three countries had reinstituted the EAC, and the concept of political federation was included as one of the core objectives, alongside a customs union, common market, and monetary union.
 

Steps Toward Political Federation

The federation was conceived as the last step in the EAC integration roadmap, to be built upon the successful implementation of preceding stages – the Customs Union, Common Market and Monetary Union.

Expanding membership of the EAC has further shaped this agenda, with Rwanda and Burundi joining in 2007, South Sudan in 2016, the Democratic Republic of the Congo (DRC) in 2022 and the Federal Republic of Somalia in 2024. With greater diversity, coordination toward a political federation has required strategic adjustments.

It is worth noting that attainment of the Political Federation is a process and not an event. Though the process has been slow, the EAC Heads of State resolved at a Special Summit held in Nairobi in August 2004 to examine ways and means of deepening and accelerating the process through a fast-track Mechanism. The Summit set up a Committee to Fast-Track the EAC Political Federation, dubbed the Wako Committee, to carry out wide consultations and finalise the work on the Political Federation. The Committee presented its report to the Summit on 29 November 2004.

The Wako Committee concluded that a Political Federation was both feasible and desirable, recommending an expedited process to address challenges of instability, fragmented markets, and weak bargaining power on the global stage. The Committee advised that the EAC skip some stages or fast-track certain phases of integration to ensure that the political federation was achieved in a shorter timeframe.

Since 2004, the EAC has been putting in place initiatives to fast-track political integration. Summit directives were given and national consultations with stakeholders between 2006 and 2008 as well as various studies were undertaken to examine, facilitate and fast-track the process. In the consultations, it became clear that the East African citizens want to be adequately engaged and to have a say in the decisions and policies pursued by the East African Community.

In May 2017, the EAC Heads of State adopted the Political Confederation as a transitional model of the East African Political Federation.

The EAC Heads of State established a team of experts from the Partner States tasked with drafting a Constitution for the proposed EAC Political Confederation, marking a significant step towards realizing the vision of a politically unified East Africa. Comprising constitutional experts from each EAC Partner State, this team works under the guidance of the EAC Secretariat and reports to the Heads of State Summit, ensuring that the process aligns with the diverse legal, political, and cultural contexts of the region.

The drafting committee’s objective is to develop a foundational document that balances shared sovereignty with national autonomy, laying out clear structures for governance, policy, and dispute resolution within the confederation model. The experts are responsible for creating a draft that can be adapted to the evolving integration needs of EAC member states, especially focusing on high-priority areas like defense, foreign policy, and regional trade, while respecting each country's domestic governance structures.

To ensure the constitution reflects the views and aspirations of East Africans, the EAC has initiated extensive national consultations across the Partner States. These consultations have been designed to foster inclusivity, allowing citizens, civil society, government officials, and other stakeholders to contribute their perspectives on the structure and function of the Confederation.

Through public hearings, workshops, and discussions led by Constitution drafting committee, citizens in each Partner State are engaged in dialogue on issues like sovereignty, governance, and shared regional values. Feedback from these consultations is continuously incorporated into the draft, ensuring that the final document reflects the collective voice of East Africans. This participatory approach has strengthened public support and trust in the integration process, setting a strong foundation for a political confederation that is both representative and resilient.
 
Political cooperation frameworks, such as the EAC Consultative Dialogue Framework, have helped align Partner States on key political goals. The East African Legislative Assembly (EALA) and the East African Court of Justice (EACJ) continue to lay the institutional groundwork for political federation by promoting harmonized laws and addressing cross-border legal matters.

The journey toward the EAC Political Federation has been gradual but steady, evolving from the experiences of the defunct EAC and adapting to the needs of a dynamic and expanding Community. A fully realized Political Federation will require continued political resolve, harmonized policies, and the sustained support of all EAC citizens.
 


The Customs Union is the first pillar of the EAC regional integration. The objective of the Customs Union is to promote regional economic integration by eliminating trade barriers and fostering a competitive environment for goods produced within the region. Through the Customs Union, the EAC seeks to remove internal tariffs and establish a common external tariff on goods imported from outside the region, creating a harmonized trading space among Partner States. This policy enhances trade efficiency, reduces production costs, and strengthens intra-regional trade. Additionally, the Customs Union aims to streamline customs procedures, curb smuggling, and increase revenue by encouraging compliance, all of which contribute to the broader goals of economic growth, poverty reduction, and improved market access for East African businesses.

As we mark the 25th anniversary of the East African Community (EAC), we celebrate a journey of transformational progress and partnership among EAC Partner States. The Customs Union, a cornerstone of regional integration, has enabled trade facilitation, economic growth, and social cohesion across the region. We highlight some of the key achievements that have shaped our region's prosperity over the last 25 years:


i.  The Signing of the Customs Union Protocol

The signing of the Customs Union Protocol on 2nd March, 2005, marked a pivotal moment in the history of the East African Community (EAC) and regional integration in East Africa. This foundational agreement is a commitment by the EAC Partner States to establish a unified customs framework that would eliminate tariffs on intra-regional trade and create a Common External Tariff (CET) for external imports. This ambitious step was designed to enhance trade, attract investment, and foster economic collaboration among member states. The Protocol laid the groundwork for subsequent initiatives, such as the Single Customs Territory, and has since played a critical role in transforming the region into a vibrant trade hub. By committing to shared economic policies and procedures, the EAC Customs Union has significantly contributed to economic growth and strengthened the ties between Partner States, reinforcing the vision of a united East African community.


ii.  Introduction of the Common External Tariff (CET) with the Four-Tariff Bands

The EAC adopted a structured Common External Tariff (CET) system, designed to protect local industries while fostering trade efficiency. The currently implements a four-band Common External Tariff with a minimum rate of 0% for raw materials and capital goods; 10% for intermediate goods not available in the region; 25% for intermediate goods available in the region and 35% for imported finished products available in the region. There are other products classified as Sensitive products which attract a rate above 35% as listed in Schedule 2 of the CET.

Click to Access the digitalized EAC Common External Tariff (CET).

The implementation of the Common External Tariff (CET) has significantly enhanced trade within the EAC by reducing trade barriers and ensuring a level playing field for local industries. This has led to increased intra-regional trade volumes and stimulated economic growth, fostering greater cooperation among Partner States. The intra-EAC trade accounting for imports and exports in the 6 EAC Partner States vis a vis the rest of the world, grew from 13.1% in 2019 at a value of US$ 7.1 billion to 15.04% in 2021 at a value of US$ 9.8 billion. EAC trade value in 2022 for the 6 EAC Partner States grew in value to US$ 10.91 billion with DRC joining the community the total EAC trade (7 EAC Partner States) grew to US$11.8 Billion.

iii.  Launch of the Single Customs Territory (SCT)

The EAC Single Customs Territory (SCT) was officially launched on 1st January, 2014. This initiative aimed to streamline customs procedures, facilitate trade, and promote economic integration among the EAC Partner States. The implementation of the Single Customs Territory (SCT) has streamlined the movement of goods across borders by consolidating customs procedures, reducing border delays, and cutting trade costs.

Implementation of the Single Customs Territory has reduced the cost of doing business by 70%, and has reduced truck turn-around time from 21 days to less than 4 days from the point of entry to the final destination.
 


 

iv.  Establishment of One-Stop Border Posts (OSBPs)

The One-Stop Border Post (OSBP) concept simplifies cross-border trade by allowing customs and immigration officials and other government agencies from neighbouring countries to conduct joint inspections at a single location, significantly reducing wait times for vehicles, goods and passengers, thereby eliminating redundant processes.

This innovative approach has enhanced trade efficiency, decreased transit times by up to 72%, and fostered stronger economic ties between EAC Partner States. The region has 16 One Stop Border Posts that are fully operational. Additionally OSBP between Kenya and Ethiopia, Tanzania and Zambia are operational.
 

One Stop Border Post (OSBP) is a border facility that combines two stops for national border control processing into one and consolidates border control functions in a shared space for exiting one country and entering another.

 

v.  Digital Integration of Customs Procedures

The EAC Customs Union has embraced digitalization through initiatives such as the Electronic Cargo Tracking System (ECTS) and the Regional Customs Transit Guarantee (RCTG). These digital tools enable real-time tracking of cargo, enhancing security and reducing the risks of delays.

Through these innovations, revenue collections in the region have grown, contributing to a 15% increase in customs revenue over the last decade.

 

vi.  Elimination of Non-Tariff Barriers (NTBs)

Significant progress has been made in identifying and reducing Non-Tariff Barriers (NTBs) that hinder trade within the EAC. Through collaborative initiatives and the establishment of frameworks for monitoring and reporting NTBs, such as the NTBs Act, 2017 the EAC has successfully identified and reduced various obstacles, such as lengthy customs procedures, excessive licensing requirements, and arbitrary roadblocks at borders.

The introduction of the EAC NTB Monitoring Mechanism has facilitated real-time tracking and resolution of these barriers, leading to increased transparency and accountability among Partner States. As a result, intra-EAC trade has grown substantially, contributing to economic integration and enhancing the competitiveness of regional industries.



 

vii.  Harmonization of Standards and Simplification of Trade Procedures

The harmonization of quality standards and trade procedures across Partner States has lowered barriers for businesses, enabling small and medium enterprises (SMEs) to thrive in regional markets.

At least 1,918 East African standards have been harmonized, an initiative that has led to a growth in exports within the EAC and fostered a predictable trading environment, creating jobs and sustaining livelihoods for millions across the region.

Download EAC Standards Catalogue 2024 Here

 

viii.  Trade Facilitation

The EAC has made significant strides in trade facilitation through the implementation of several strategic policies aimed at enhancing regional economic integration. The EAC Trade Policy, 2021 provides a framework for promoting intra-regional trade and investment by streamlining customs procedures and reducing trade barriers. Complementing this, the EAC MSME Policy focuses on supporting micro, small, and medium-sized enterprises by facilitating access to finance, improving market linkages, and providing business development services, thereby enabling these businesses to thrive in a competitive environment.

Recognizing the vital contribution of MSMEs to economic growth and job creation, the has simplified regulatory frameworks and facilitating access to markets both within the region and beyond. The EAC has implemented various programs, such as training workshops and the EAC MSMEs Trade Fair, to equip MSME owners with essential skills in entrepreneurship, marketing, and technology. These comprehensive efforts collectively empower MSMEs, fostering innovation and contributing to sustainable economic development in the region.

On international trade the EAC has adopted the EAC Schedule of Tariff Concessions for the African Continental Free Trade Area (AfCFTA), which encompasses Category A products. This schedule, covering 90% of tariff lines, will be implemented over a ten-year timeframe, facilitating greater access to markets within the continent. Additionally, the EAC has established a Schedule of Specific Commitments on Trade in Services under the AfCFTA framework, which aims to enhance service sector integration and promote trade in services among member states. Notably, trading under AfCFTA preferences has already commenced, with Rwanda and Kenya exporting goods to Ghana, marking a significant step towards realizing the benefits of the AfCFTA for EAC Partner States. These initiatives reflect the EAC's commitment to enhancing regional and continental trade, driving economic growth, and fostering stronger trade ties across Africa.



 

ix.  Investment Promotion

To further bolster investment, the EAC has developed several policy documents and frameworks that provide a solid foundation for regional economic growth. The EAC Regional Investment Policy, adopted in 2006, aims to create a conducive environment for private sector investment by harmonizing regulations and promoting investor confidence.

To further bolster investment, the EAC has developed several policy documents and frameworks that provide a solid foundation for regional economic growth over the past 25 years. A notable achievement is the adoption of the EAC Regional Investment Policy in 2006, which aims to create a conducive environment for private sector investment by harmonising regulations and promoting investor confidence. This policy has led to the establishment of a more predictable and stable investment climate, resulting in increased foreign direct investment (FDI) flows into the region.
 

x.  Establishment of the East African Competition Authority

The EAC Competition Authority, an institution of the EAC grounded in the Treaty and various protocols, is tasked with promoting and protecting fair competition while ensuring consumer welfare across the region. The Authority plays a crucial role in regulating cross-border anti-competitive business practices, thereby advocating for efficient and competitive markets within the EAC. Through its investigative and adjudicative functions, the Authority regulates market structures by controlling mergers and acquisitions, oversees market conduct by prohibiting anti-competitive practices, and protects consumers from misleading representations in transactions. Additionally, its commitment to advocacy and capacity building has enhanced awareness and understanding of competition laws among businesses and consumers alike. This robust framework not only fosters a fair trading environment but also contributes to regional economic integration and sustainable growth within the EAC.

More on the East African Competition Authority


These milestones under the EAC Customs Union highlight the progress achieved over 25 years and showcase the EAC’s commitment to enhancing regional integration and economic prosperity. Together, we look forward to a future of even greater collaboration and shared success in the East African region.

 

The Monetary Union is the third pillar of the EAC integration agenda. The primary objective of the EAC Monetary Union is to create a single regional currency that will facilitate easier trade and economic integration among Partner States. By establishing a common currency, the EAC aims to reduce transaction costs, eliminate exchange rate fluctuations, and improve price stability across the region. This move is expected to enhance economic resilience, boost investor confidence, and foster cross-border trade and investments by creating a more predictable economic environment.

Building on the EAC Common Market, the Monetary Union seeks to promote the free movement of goods, services, and people, further advancing regional cohesion and fostering sustainable economic growth across East Africa.

To date, the EAC has made remarkable progress under the Monetary Union pillar since the signing of the EAC Monetary Union Protocol in 2013. This Protocol aims to establish a single currency for the region and enhance economic integration among Partner States. The following are key achievements over the past 25 years:

i.  Signing of the EAC Monetary Union Protocol (2013):

The signing of the EAC Monetary Union Protocol in 2023 Laid the groundwork for the establishment of a monetary union, outlining the framework for the implementation of a single currency in the EAC.

The EAMU Protocol was signed on 30th November, 2013 and set the groundwork for a monetary union within 10 years while allowing the EAC Partner States to progressively converge their currencies into a single currency in the Community.


ii.  Formation of the EAC Monetary Affairs Committee (2013):

The EAC Monetary Affairs Committee was established to oversee the implementation of the Monetary Union Protocol and ensure coordination of monetary policies among Partner States. One of its key achievements includes the successful coordination of monetary policies across the region, which has fostered macroeconomic stability and aligned financial regulations among Partner States.

The Committee has been instrumental in the preparation and implementation of the roadmap for the EAC single currency, conducting regular assessments to ensure that Partner States meet the necessary convergence criteria. Through capacity-building initiatives and stakeholder engagements, the Committee has strengthened the technical competencies of Partner States in monetary policy formulation, thereby laying a solid foundation for the eventual establishment of a fully integrated monetary union in the region.

 

iii.  Establishment of Institutions to support the East African Monetary Union

The Council of Ministers approved the organisational structure for the East African Monetary Institute (EAMI) and initiated the administrative process for identifying the host Partner State for the EAMI.

The EAMI is a crucial institution within the EAC to facilitate the integration of monetary policies among Partner States as the region moves towards a Monetary Union. The EAMI is expected to played a pivotal role in coordinating efforts to create a stable macroeconomic environment conducive to regional economic integration. The Institute will be responsible for conducting research and providing technical support on monetary issues, overseeing the implementation of the EAC Monetary Union Protocol, and preparing the groundwork for the eventual establishment of a single currency.

The East African Legislative Assembly (EALA) has passed critical bills for the establishment of the EAC Bureau of Statistics, the East African Surveillance, Compliance and Enforcement Commission, and the East African Financial Services Commission, marking a significant step towards strengthening regional governance and economic oversight all in support on the Monetary Union. These institutions aim to provide comprehensive frameworks for statistical data management, compliance with financial and economic policies, and regulation of financial services across the region. The bills are currently awaiting assent by the EAC Heads of State.

 

iv.  Implementation of Payment and Settlement Systems in the region

The implementation of payment and settlement systems in the region has enhanced the efficiency of cross-border transactions within the region. By streamlining payment processes, the regional payment systems allow for quicker and more efficient transactions between Partner States, fostering increased trade and economic collaboration. The Partner States’ Central Banks continue to implement secure, efficient, and reliable payment and settlement systems to ensure efficient flow of transactions within the region. The EAC Payment and Settlement Systems Integration Project (EAC-PSSIP) provides connectivity to all Partner States’ Central Banks by linking their real-time gross settlement systems (RTGS) to the East African Payment System (EAPS).

This integration has supported the growth of e-commerce by providing a dependable payment mechanism for online transactions, which encourages digital trade and entrepreneurship. Accompanied by capacity-building initiatives aimed at equipping financial institutions and stakeholders with essential skills.

Seamless Transactions Across Borders: Empowering East Africans through cross-border mobile payments for a more connected and economically integrated region

 

v.  Implementation of the Roadmap for the East African Monetary Union:

The EAC has continued to make progress in implementing the Roadmap for the East African Monetary Union (EAMU) as it advances toward the goal of achieving a single currency by 2031. This roadmap outlines essential milestones, including the establishment of key institutions such as the East African Monetary Institute (EAMI). The EAC has also prioritized the harmonization of fiscal policies, inflation control measures, and financial sector regulations to ensure macroeconomic stability and coherence among its Partner States.
 

The East African Shilling, used from 1921 to 1969,was a unifying currency that facilitated trade and economic integration across Kenya, Uganda, Tanganyika (now Tanzania), and later Zanzibar. Issued by the East African Currency Board, it symbolized regional cooperation and economic strength, simplifying transactions and promoting a shared economic identity. Even after its replacement by individual national currencies, the East African Shilling remains a historic emblem of regional unity and the potential for a common currency in East Africa today.


These achievements underscore the EAC's commitment to fostering economic integration and stability within the region, paving the way for a successful monetary union that will benefit all member states.

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25th Anniversary of the East African Community (1999 - 2024).
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