Back Matter

Back Matter

Author(s):
Paulo Drummond, S. Wajid, and Oral Williams
Published Date:
January 2015
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    Contributors

    Christopher S. Adam is Professor of Development Economics and Research Associate of the Centre for the Study of African Economies, University of Oxford. He is currently the Research Director for Tanzania for the Oxford-London School of Economics International Growth Centre. He is a Fellow of the European Development Network; Visiting Professor at the University of Clermont-Ferrand, France; and a Visiting Scholar in the Research Department of the IMF.

    Nabil Ben Ltaifa is a Senior Economist in the Middle East and Central Asia Department of the IMF. He has extensive experience in macroeconomic policy and reforms, IMF program design, monetary and financial sector reforms cross-country analysis, and IMF technical assistance. His wide-ranging experience extends to several IMF programs and low-income countries in the Middle East and sub-Saharan Africa.

    Hamid R. Davoodi is a Senior Economist in the IMF’s Institute for Capacity Development. He has been with the IMF since 1997 working on countries in Europe, the Middle East, Central Asia, and Africa. Prior to joining the IMF, he worked as an independent consultant at the World Bank, taught at Georgetown University’s Economics Department, and worked in the research department at the Federal Reserve Bank of San Francisco. His work has been published in books and academic journals. He holds degrees from the London School of Economics (BSc Economics), the University of California (MS Applied Economics), and the University of Wisconsin at Madison (PhD Economics).

    Shiv Dixit, an Indian national, is a PhD student in economics at the University of Minnesota. Prior to this, he was a Research Assistant in the African Department at the IMF.

    Paulo Drummond, a Brazilian national, is a Deputy Division Chief in the African Department of the IMF. Mr. Drummond holds a PhD in economics from the University of Illinois at Urbana-Champaign. Prior to joining the IMF, he worked for the holding company of the group Bunge & Born and for Coopers & Lybrand. At the IMF, he has worked on a range of industrial, emerging market, and low-income countries in the European Department and the Policy Development and Review Department.

    Sanjeev Gupta is the Acting Director of the Fiscal Affairs Department of the IMF. He has also worked in the IMF’s African and European Departments. Mr. Gupta has led IMF missions to some 25 countries in Africa, Asia, Europe, and the Middle East, and represented the IMF in numerous international meetings and conferences. Prior to joining the IMF, he was a Fellow of the Kiel Institute of World Economics, Germany; Senior Faculty in the Administrative Staff College of India, Hyderabad; and Secretary (Economic Affairs) of the Federation of Indian Chambers of Commerce and Industry. Mr. Gupta has authored or coauthored over 100 papers on macroeconomic and fiscal issues and authored, coauthored, or coedited 10 books.

    Richard Hughes is Division Chief of the Public Financial Management Division of the IMF’s Fiscal Affairs Department. He has led the IMF’s efforts to support reform to budgetary institutions in crisis-hit countries in Europe including Iceland, Ireland, Greece, and Portugal. In 2010, he helped launch the IMF’s work with the East African Community Secretariat and member countries to help them to establish the regional and national fiscal prerequisites for East African Monetary Union.

    Etibar Jafarov, a national of Azerbaijan, is a Senior Economist in the Monetary and Capital Markets Departments of the IMF. He holds a PhD in economics from Keio University (Tokyo, Japan), and a master’s degree in international banking from Marmara University (Istanbul, Turkey). His latest research has been mostly in the areas of macroprudential policy, monetary policy framework, monetary union, financial-real sector linkages, cross-country trade and economic linkages, and fiscal management.

    Pantaleo Kessy is Assistant Manager of the Research Department at the Central Bank of Tanzania. He is also a Senior Country Research Fellow for the International Growth Centre in Tanzania. His research interest is in macroeconomic policies in developing countries. Most recently, his work has been on the analysis of monetary and exchange rate policies in the economies of East Africa. He holds an MA (Economics) from the University of Dar Es Salaam, Tanzania, and a PhD (Economics) from Colorado State University, specializing in monetary and financial economics.

    Camillus Kombe is a Manager in the Economics Department, Bank of Tanzania, Dodoma Branch. He is also a member of the Bank of Tanzania, Technical Research Committee. His main areas of research interest include monetary policy, economic growth in developing countries, regional economic integration, and exchange rate issues. His most recent work has been the analysis of the current account and real exchange rates in Southern African Development Community countries. He holds an MA (Economics) and a PhD (Economics) from the University of Geneva, Switzerland, specializing in international economics.

    Catherine McCauliffe is currently Assistant to the Director in the Communications Department at the IMF. She was previously Mission Chief for Liberia, Rwanda, and Guinea Bissau in the IMF’s African Department. She also has extensive experience working as an economist on other African countries. She received a master’s degree in international economics from Tufts University’s Fletcher School of Law and Diplomacy.

    Jimmy McHugh is Senior Economist in the IMF’s Fiscal Affairs Department. Previously, he has worked as the IMF’s Resident Representative in Armenia and the Kyrgyz Republic. He has also worked in the Directorate-General for Economic and Financial Affairs (European Commission). He holds a PhD from St. Antony’s College, Oxford University.

    Armando Morales, a national of Peru, is a Senior Economist in the IMF’s African Department. He was Resident Representative in Indonesia, and Mission Chief for Financial Sector Assessment Programs and technical assistance missions to Latin American and African countries. Before joining the IMF, he worked in Peru as head of research at Macroconsult and as advisor at the Central Bank. He holds degrees from the Kiel Institute of World Economics, Germany, and Northeastern University, Boston.

    Stephen A. O’Connell is Chief Economist at the U.S. Agency for International Development and Gil and Frank Mustin Professor of Economics at Swarthmore College. He coedited The Political Economy of Economic Growth in Africa 1960–2000 (vol. 1, 2007; vol. 2 2008; Cambridge University Press), and has written extensively on monetary policy issues in Tanzania and the East African Community. In 2013, he was a Visiting Scholar in the Research and Strategy, Policy, and Review Departments of the IMF.

    Gabor Pinter is an Advisor in the Bank of England’s Centre for Central Banking Studies. He holds a PhD in economics from the University of Cambridge and an MSc in economics from the University of Cardiff. Previously, he was a visiting scholar at Princeton University and a summer intern at the IMF.

    Sweta C. Saxena is a Senior Economist in the IMF’s Research Department. She joined the IMF in 2009, working on African countries. Prior to joining the IMF, she worked in the Emerging Markets Unit at the Bank for International Settlements in Switzerland and at the University of Pittsburgh in the United States. Her research focuses on policy-relevant macrofinancial issues, namely, crises and recoveries, contagion, and exchange rates. She has published in academic journals. She holds bachelor’s and master’s degrees in economics from Delhi University, and a PhD from the University of Washington.

    S. Kal Wajid has served as Division Chief in the African and Monetary and Capital Markets Departments of the IMF. He has extensive experience in macroeconomic, monetary, and financial sector policies, including at the IMF, the Institute of International Finance, the Board of Governors of the Federal Reserve System and Bank of America. He has led IMF missions to numerous countries, including as part of the leadership team for the Financial Sector Assessment Program (FSAP) for the United States and leadership of FSAPs for South Africa, Denmark, Croatia, Pakistan, Barbados, and the Nordic-Baltic Regional Financial Integration Project.

    Oral Williams is a Deputy Division Chief in the African Department of the IMF. He is currently Mission Chief for Burundi, previously led missions to Oman, and worked in the IMF’s Fiscal Affairs, Western Hemisphere, and Middle East and Central Asia Departments. Prior to joining the IMF, he was a Deputy Director in the Eastern Caribbean Central Bank. He has published in academic journals and at the IMF on topics including fiscal and monetary policy, the economics of resource-rich countries, international finance, and development macroeconomics.

    Masafumi Yabara is a Deputy Director of the Ministry of Finance, Japan, responsible for macroeconomic policy planning including monetary policy coordination with the Bank of Japan. He previously worked for the African Department of the IMF on Rwanda, South Sudan, and Lesotho, as well as research projects on sub-Saharan Africa such as financial integration and growth take-offs of the region.

    Mary Zephirin is a Deputy Division Chief in the Technical Assistance Division of the Monetary and Capital Markets Department of the IMF. Prior to joining the IMF, she was an advisor in the Central Bank of Barbados and has also worked as a consultant, and with the United Nations Children’s Fund and the United Nations Development Programme. Ms. Zephirin has a PhD in economics from the University of Warwick.

    Index

    [Page numbers followed by b, f, or t refer to boxed text, figures or tables, respectively.]

    A

    • Access to financial services, 31–32, 282

    • Assessment

      • of capital mobility, 162, 163, 165–167

      • of financial stability, capacity for, 197–202, 214–215t, 234

      • See also Financial Sector Assessment Program; Risk assessment and

    B

    • Bank of Tanzania, 112, 118–119, 149, 237, 246, 279

    • Bank of Uganda, 111–112, 117, 118, 136, 152, 277

    • Bank One Limited, 232

    • Banque de la République du Burundi, 119

    • Barclays Bank, 228

    • Basel Committee and Core Principles, 202–203, 208, 209, 210b, 227, 274–275

    • Base money growth, 110f

    • Bond markets, EAC, 234, 239, 242, 242t

    • BRICS countries, 8

    • Broad money

      • current monetary policy targeting in EAC, 136–137

      • economic growth and, 21f

      • trends in EAC, 4t, 109, 109f

    • Budget frameworks and execution, 91–95, 98

    • Burundi

      • fiscal balances, 44

      • poverty reduction in, 11, 13

      • projected monetary policy outcomes, 144–145, 144f, 145f,

      • recent economic growth, 11, 15, 22, 35

      • See also East African Community (EAC)

    C

    • Capital Market Authority, 273, 274–277

    • Capital markets

      • current state of, in EAC, 267, 268–269, 273

      • findings from Financial Sector Assessment Programs, 8, 283–284

      • recommendations for harmonization, 103, 122, 205

      • regulatory framework, 103, 205, 234–235, 270b, 275, 276

      • See also Securities and stock markets

    • Capital mobility

      • assessment methodology, 164, 165, 167–169

      • capital account liberalization to promote financial integration, 245–246

      • current EAC, 164f, 165–166, 165t, 169–170, 245–246

      • exchange rate policy and, 163–164, 167, 169–170

    • Caribbean Monetary Union, 41–44, 57–59t

    • Central African Economic and Monetary Community, 41–44, 74–75, 86, 89, 90, 91, 92–93, 94, 97, 104, 134

    • Central Bank of Kenya, 111, 117, 118, 136, 279

    • Central banks

      • autonomy issues, 105, 106–107, 108, 125–126t

      • crisis management capacity and authority of, 278

      • currency union exchange rate regime and, 102

      • in EAC monetary union, 99–100

      • East African Central Bank, 61, 99–100, 106, 195

      • exchange rate policy and, 162–163

      • in financial stability framework, 199–200

      • financing of national budgets in EAC, 101

      • governance structure, 127–130t

      • harmonization of monetary policy and, 105, 106–107

      • legal frameworks for, 107–108, 123–124, 125–130t

      • limits on deficit financing in convergence criteria, 43–44

      • liquidity injections, 118, 123

      • memoranda of understanding between, 203, 204, 205, 210, 222, 237, 275, 277, 279

      • monetary policy of EAC countries, 111–112, 112f

      • mop-up instruments, 118

      • overdraft facilities, 76

      • policy interest rates, 117

      • recommendations for monetary policy harmonization, 120–122

      • reserve requirements, 117–118, 118f

      • standing facilities, 119, 123

      • supervisory role of, in EAC, 2040–206

      • treasury relations of, in EAC, 107

    • Child mortality, 11, 19f, 27f

    • China, 223

    • Citibank, 228, 229

    • Co-integration modeling, 248, 256–257

    • Commercial Bank of Africa, 231

    • Committee on Payments and Settlements Systems, 211

    • Common Market for Eastern and Southern Africa, 81

    • Common Market Protocol, 11, 245

    • Common Monetary Area, 104, 105

    • Communauté Financière Africaine, 42, 47, 57–59t, 104

    • Competitiveness, external

      • in EAC, 32–34

      • economic growth and, 20–21, 22f

      • effect of monetary union on, 187–188, 190

      • policy recommendations for growth acceleration in EAC, 36–37

    • Complex financial institutions, 201

    • Contagion risk, 7, 229–231, 236–237

    • Convergence

      • adjustments in response to large shocks, 72, 73, 82

      • benchmarks, 73, 76

      • central bank overdraft facilities and, 76

      • criteria, 2, 39–41, 40b, 41b, 62, 68–71

      • customs union, 78–79

      • data collection and analysis needed for, 44, 71, 73, 77–78, 82, 95–96

      • EAC compliance with criteria for, 3–4, 44–52

      • exchange rate, 43, 50–52, 160, 161, 170–178, 174t

      • fiscal criteria issues, 71–79, 82, 85–86

      • fiscal policy strategies to promote, 70

      • future challenges and opportunities for EAC, 8–9, 56

      • implications of recent food and fuel shocks, 81–82

      • in interbank markets, 252–253, 252t, 254, 254f, 255t, 257, 258

      • international comparison of convergence criteria, 41–44, 50–51, 57–59t

      • measurement of, 53

      • monetary union and, 39, 41, 53, 87

      • natural resource incomes and, 8–9

      • policy recommendations for growth acceleration in EAC, 36

      • progress toward, 2–4, 54–55, 79, 257–259

      • public debt criteria, 70–71, 74–76

      • public financial management capacity for, 78

      • rationale, 39, 52–53, 68–71

      • response to external shocks and, 52–53

      • schedule, 39, 71, 72–73, 72f, 77, 99 in securities markets, 254–257, 255t, 256t, 258

      • tax systems, 81

      • in Treasury bill markets, 250–251, 250t, 251t, 253–254, 253f, 255t, 257, 259

      • trends, 7–8, 109–110

      • See also Harmonization of monetary policy

      • Credit markets

        • access issues, 31, 286

        • current EAC, 227

        • economic growth and, 21f

        • monetary policy transmission channel, 139–140, 148–149

        • risk assessment in EAC, 271

        • trends in EAC, 4t, 28, 29f, 31, 267

      • Currency union, EAC

        • harmonization of monetary policy in transition to, 100

        • plans for, 99

      • Current account balance

        • in EAC, 32, 33f

        • economic growth and, 21, 22f

      • Customs union, EAC, 1–2, 78–79, 199, 223–224

      • Customs Union Protocol, 1, 199

    D

    • Dar es Salaam Stock Exchange, 242–243, 256

    • Debt markets, EAC, 241–242, 241t, 242t

    • Deposit insurance, 213, 279, 280t

    • Domestic savings

      • economic growth and, 20, 21f

      • policy recommendations for growth acceleration in EAC, 35

      • trends in EAC, 29, 29f

    • Dutch disease, 9, 46, 161, 187, 188–189, 190, 193–194

    E

    • EAC. See East African Community

    • East Africa Cross Border Payments System, 281

    • East Africa Member States Securities Regulatory Authority, 246

    • East Africa Monetary Institute, 120, 123

    • East African Central Bank, 61, 99–100, 106, 199

    • East African Community (EAC)

      • adjustments to real exchange rate shocks, 185–187, 186t

      • budget execution in, 94–95, 95f

      • capital account openness, 164f, 165–166, 165t, 245–246

      • central bank credit practices, 117–119, 118f

      • central bank legal frameworks, 125–130t

      • challenges to sustained growth in, 35

      • current capacity for financial stability assessment in, 201–206, 218–219t, 238

      • current compliance with economic convergence criteria, 3–4, 44–52

      • debt markets, 241–242, 241t, 242t

      • deficit financing, 44

      • economic performance, country characteristics correlated with, 22–34

      • economic performance trends, 2, 3–4t, 5t, 11, 12f, 62–66, 63f, 63t, 64f, 64t, 81–82

      • effects of global financial crisis, 67–68

      • exchange rate regimes, 101, 111, 112f, 161–163, 174–175

      • financial sector characteristics, 220t, 226–228, 264–268, 261f

      • fiscal balances, 44–47, 47f, 79

      • fiscal reporting regimes, 95, 97t

      • fiscal surveillance in, 77–78

      • foreign direct investment flows, 224, 224t

      • foreign-owned banks in, 228–234, 265–266, 266f

      • foreign reserves, 51f, 52

      • goals of, 1

      • grant flows to, 74, 74t

      • income gaps, 54

      • inflation rates, 49–50, 50f, 68, 108–109, 109f, 111, 111f

      • interest rate policies, 111–112, 112f, 117

      • interest rates, 249, 249t

      • macroeconomic stabilization in, 5t

      • medium-term budget frameworks, 91–92, 92f, 98

      • members, 1

      • monetary policy, 100, 118–116 135–137

      • monetary policy transmission mechanisms, 113–115, 135, 137–138, 153–154

      • pension systems, 235, 267, 268t, 272

      • policy recommendations for growth acceleration in, 35–36

      • population movement in, 224–226, 225t

      • public debt, 47–49, 48f, 63, 64f, 64t, 65

      • recent food and fuel shocks, 6, 81–824

      • remittances to, 226

      • revenue performance, 65, 66, 66f

      • securities markets, 234–235, 234t, 242–244, 243t, 246, 249, 249t, 258, 268–269, 269f

      • top-down budgeting in, 93–94

      • trade integration in, 52–53

      • trade patterns, 222–224

    • East African Cross-Border Payment System, 228

    • East African Currency Area, 1, 99

    • East African Currency Unit, 161, 179–181

    • East African Member States Securities Regulatory Authorities, 205, 234, 284

    • East African Monetary Union, 39

    • East African Payments System

      • Harmonization Committee, 205–206

    • Eastern Caribbean Currency Union, 41–44, 47, 57–59t, 74–75, 104, 134

    • Ecobank, 227

    • Educational access and attainment

      • EAC spending on education, 71f

      • economic growth and, 19, 19f, 26–28, 28f

      • patterns in EAC, 11

    • Electricity supply, 26

    • Equity Bank, 232

    • European Central Bank, 160, 199

    • European Currency Unit, 179–180

    • European Monetary Institute, 105, 106

    • European Monetary System, 105

    • European Union, 41–44, 47, 49, 50–51, 57–59t, 74–75, 86, 87–88, 89, 89f, 91, 92–94, 92f, 96, 97t, 98, 179–180, 214, 215, 222–223

      • budget execution in, 94–95, 94f

      • exchange rate convergence in transition to, 171, 173, 176

      • exchange rate mechanism, 104

      • harmonization experience, 105–106

      • lessons from global financial crisis, 215b

    • Exchange rate policy in transition to monetary union, 6–7, 100–101

      • collective anchor system, 174t, 176–177

      • convergence criteria, 43, 50–52, 172–173

      • convergence phase, 160, 161, 170–178, 174t

      • conversion parities, 181–182

      • conversion phase, 160, 161, 178–182

      • delegated anchor system, 174t, 175–176

      • external grid system, 174t, 175

      • goals for, 159

      • internal grid system, 174t, 176

      • introduction of East African Currency Unit, 179–181

      • managed float system, 174–175, 174t, 177–178, 189

      • plausible choices, 177–178

      • projected postunion impacts, 161

      • recommendations for EAC, 160–161, 190–191

      • resolving real rate misalignment, 182–187, 189–190

      • trilemma proposition and, 164

    • Exchange rates

      • capital mobility and, 163–164, 167, 169–170

      • central bank role in setting, 162–163

      • central bank structure under currency union and, 102

      • current EAC regimes, 101, 111, 112f, 161–163

      • for East African Currency Unit, 179

      • economic growth and, 20–21

      • effect of monetary union on, 187–189, 192–195, 193f, 194t

      • external competitiveness of EAC economies and, 32

      • flexibility, 52, 100–101, 102, 111, 112, 112f, 113, 120, 162, 163–164

      • grid-plus-band system, 160, 176

      • in harmonization of monetary policies, 104, 105–106

      • inflation targets, 174–175

      • modeling monetary policy effects, 146–147, 147f

      • monetary expansion and, 169–170, 170f

      • monetary policy transmission mechanisms, 113–115, 139

      • policy responses to recent shocks, 8

      • recommendations for monetary policy harmonization, 120–122

      • strategies for strengthening monetary transmission mechanisms, 155

      • surveillance exercise prior to monetary union, 190

      • trends in EAC, 32, 32f, 110f

      • trilemma proposition, 163–164

      • See also Exchange rate policy in transition to monetary union

    • Expectations, 140

    F

    • Fina Bank, 232

    • Financial integration in EAC

      • benefits of, 2, 52–53, 221, 239

      • capital account liberalization for, 245–246

      • contagion risk management, 7

      • current state of, 221–222

      • economic growth rationale for, 239–240

      • financial stability framework for, 7–8

      • findings of financial sector assessment programs, 8, 263, 264b

      • future challenges and opportunities, 8–9

      • goals, 244

      • harmonization of market infrastructure for, 246

      • harmonization of regulatory and supervisory frameworks for, 270b

      • measurement of, 233b, 240, 246–250

      • progress to date, 1, 7–8, 61, 77, 245–246, 250–259

      • risk susceptibility in, 229–222

      • wider integration efforts in Africa and, 81, 83

      • See also Convergence; Harmonization of monetary policy

    • Financial sector

      • access to services, 29–31

      • assessment programs, 8, 234

      • banking sector soundness, 269–271

      • bank profitability, 270

      • characteristics of, economic growth and, 20, 21f

      • characteristics of, in EAC countries, 220t, 221–222, 226–228, 264b

      • complex institutions, 201

      • concentration in EAC, 264, 266–267, 266f

      • contagion risk in EAC, 229–231, 236–237

      • crisis management in EAC, 206, 278–279

      • depth in EAC, 28–31, 29f, 30f, 264, 265f

      • economic growth in EAC and characteristics of, 28–31

      • foreign-owned banks in EAC, 228–234, 265–266, 266f

      • harmonization of regulatory and supervisory frameworks, 270b

      • insolvency regimes, 213

      • long-term financing markets, 286

      • mobile payments, 277, 281

      • need for broader inclusion in EAC, 284–286, 284b

      • obstacles to development in EAC, 243–244

      • obstacles to economic growth in low-income countries, 239

      • payments system, 205–206, 210, 237–238

      • regulatory framework in support of monetary policy harmonization, 105

      • small-scale services, 277

      • soundness indicators in EAC, 219t

      • as source of economic growth, 239

      • structure in EAC countries, 264–269, 265f

      • See also Financial stability framework

    • Financial Sector Assessment Programs, 202

      • findings on capital market development, 283–284

      • findings on crisis management arrangements, 278–279

      • findings on liquidity and debt management, 282–283

      • findings on payments and settlement systems, 281–282

      • findings on regulation and supervision, 274–282

      • key findings from, 263, 264b, 283b

      • risk assessment in, 271–2720

    • Financial stability framework, 7–8

      • crisis management and safety nets in, 206, 212–213

      • current EAC institutions and practices, 201–206, 217–218t

      • development of common EAC system, 204, 216

      • elements of, 190–200

      • implementation, 216

      • infrastructure harmonization in, 211

      • lessons from global financial crisis, 214–216

      • macro-financial analysis in, 207–208, 215

      • in preparation for monetary union,200–201

      • rationale for, 200, 216

    • Fiscal balance

      • benchmarks, 76

      • central bank financing of, 43–44

      • convergence criteria, 2–4, 42, 43–44, 71–73, 74, 82, 85–86

      • current EAC compliance with convergence criteria, 44–47, 47f

      • economic growth and, 17, 18f, 24, 25f, 28

      • grant incomes and, 46

      • policy recommendations for growth acceleration in EAC, 36

      • surveillance rationale, 46, 75, 76, 77–78, 82

      • trends in EAC, 3t, 5t, 62–66, 63f, 63t, 77

    • Fiscal policy

      • after adoption of monetary union, 79–81

      • challenges of monetary union for, 61–62, 70

      • current movement toward regional integration, 61

      • EAC monetary union convergence criteria and, 62, 71–79, 85–86

      • future challenges and opportunities, 4, 8

      • medium-term budget framework development, 91–92, 98

      • regional cooperation in monetary union, 85

      • responses to global financial crisis, 68, 81

      • risk management, 89–90, 90f

      • strategies for promoting convergence, 62, 70

      • in support of harmonization of monetary policy, 103

      • See also National fiscal institutions

    • Flexible reserve money program, 137, 154

    • Food prices, 6, 36, 49, 70, 83–84, 115

    • Foreign direct investment

      • current flows in EAC, 224, 224t

      • economic growth and, 16–17, 17f

      • exchange rate convergence and competition for, 172–173

      • growth performance in EAC and, 23f, 24

      • Fuel prices, 6, 36, 49, 70, 81–82

    G

    • Germany, 176, 219

    • Global financial crisis. See Great Recession

    • Governance

      • economic growth and, 17–18, 18f, 26, 26f

      • in financial stability framework, 209

      • institutional readiness for monetary union, 75, 80

      • See also National fiscal institutions; Regulation

    • Grants, 46, 64, 67–68, 71f, 75, 76, 76t, 79

    • Great Recession

      • EAC economic policies and, 69, 70, 83

      • effects of, 8, 71–72

      • lessons from, 214–216, 215b

    • Growth

      • characteristics of EAC countries correlated with, 22–34, 35

      • drivers of, in EAC, 2, 13–14, 35

      • educational attainment and, 19, 19f

      • external competitiveness and, 20–21, 22f

      • financial integration in EAC to promote, 239–240

      • financial market development and, 239

      • financial sector depth and, 20, 21f, 28–31, 29f, 30f

      • fiscal deficits and, 17, 18f, 24, 25f

      • foreign direct investment and, 16–17, 17f, 23f, 24

      • Great Recession effects on, 8, 67–68

      • health status and, 19, 19f

      • historical episodes of, 14–15, 15t

      • inflation and, 18, 19f, 24–25, 25f

      • infrastructure investment and, 20, 20f, 26, 27f

      • official development assistance and, 17, 18f

      • poverty reduction and, 13

      • productivity and, 17, 17f, 22–23, 23f

      • quality of public institutions and, 17–18, 18f, 26, 26f

    • sustained versus nonsustained,

      • characteristics of countries with, 16–21, 34

    • trends in EAC, 2, 3t, 11, 12f, 22, 23f, 68t

    • Gulf Cooperation Council, 39–42, 45, 60 74–79, 173

    H

    • Harmonization of legal framework, 201, 210, 2842

    • Harmonization of monetary policy

      • central bank autonomy and, 107, 108–109

      • central bank instruments and operations, 126–127

      • centralization versus decentralization in, 104–105, 106

      • challenges in EAC, 101–102

      • complementary policies in support of, 103

      • current EAC monetary policy differences and, 108–116

      • in European Monetary Union, 105–106

      • exchange rate policies in, 100–101, 104, 105–106

      • flexibility in, 103

      • inflation goals and, 101

      • money market infrastructure, 122

      • pace of, 99

      • rationale for, in transition to monetary union, 99, 103, 131

      • recommendations for implementation, 102–103, 119–124, 121f

      • scope of, 99–100

      • in transition to currency union, 100, 120

      • in transition to monetary union, 6

      • See also Transition to monetary union

    • Health system

      • economic growth and population health, 19, 19f, 26–28, 27f

      • spending, 66, 66f, 69f

    • Housing markets, 282

    I

    • Income, per capita. See Per capita income

    • India, 219

    • Inflation

      • convergence criteria, 2–4, 42, 49–50

      • current monetary policy targeting in EAC, 136

      • economic growth and, 18, 19f

      • exchange rate policy targeting, 174–175

      • Great Recession and, 70

      • growth performance in EAC and, 24–25, 25f

      • harmonization of monetary policy and, 101

      • policy recommendations for growth acceleration in EAC, 36

      • price puzzle, 134–135

      • recent food and fuel shocks, 6, 49

      • trends in EAC, 3t, 5t, 49, 50f, 68, 102, 108–109, 109f, 111, 111f

    • Infrastructure investment

      • economic growth and, 20, 20f, 26, 27f

      • future of EAC integration and, 8

      • recommendations for growth acceleration in EAC, 36

    • Insolvency regimes, 213, 278

    • Insurance sector

      • characteristics of EAC countries, 227–228, 267–268, 268t

      • cross-border activities in EAC, 235

      • financial stability analysis, 207–209

      • recommendations for cross-border coordination, 237

      • risks and vulnerabilities, 272, 273

      • supervision, 203–204, 276

    • Insurance Supervisory Principles, 208

    • Interest income in EAC, 227

    • Interest rates

      • convergence criteria, 43

      • current EAC policies, 101

      • in EAC banking sector, 227, 231–233, 233f, 248–249, 249t

      • EAC policy trends, 110f, 111–112, 112f, 117

      • interbank market convergence in EAC, 252–253, 252t, 254, 254f, 255t, 257, 258

      • monetary policy transmission mechanisms, 113–115, 138–139, 153, 154

      • recommendations for monetary policy harmonization, 120

      • strategies for strengthening monetary transmission mechanisms, 154–155

      • vulnerability of financial system to risk from, 271

    • International Association of Insurance Supervisors, 200, 205–206

    • International Organization of Securities Commissions, 204, 206

    • International Public Sector Accounting Standards, 96

    • Investments and Mortgages Bank, 228

    K

    • Kenya

      • fiscal balances, 46

      • grant income, 46

      • poverty reduction in, 11, 13

      • projected monetary policy outcomes, 145–147, 146f, 147f

      • recent economic growth, 15, 22, 35

      • See also East African Community (EAC)

    • Kenya Commercial Bank, 227

    L

    • Legislation

      • budget execution controls, 94–95

      • central bank authorities, 107–108, 123–124, 125–130t

      • current differences among EAC monetary policies, 101

      • harmonization of financial regulation, 201, 210, 284

      • national fiscal, in monetary union, 87–89, 89f

    • Liquidity

      • assistance, 212, 212b, 278

      • banking system, 271

      • forecasting, 116

      • management, 282

    M

    • Macroprudential policies, 272

    • Macroprudential supervision, 214–215

    • Medium-term budget frameworks, 91–93, 93f

    • Memoranda of understanding, 202, 204, 205, 210, 222, 237, 275, 277, 279

    • Microfinance, 204, 277, 284b, 285–286

    • Middle-income households, 13

    • Migration, 224–226, 225t

    • Millennium Development Goals, 11

    • Monetary Affairs committee, 61

    • Monetary policy

      • central bank credit to government, 117–119, 118f

      • current EAC, 101, 108–116, 135–137

      • decision making structures, 116

      • fiscal policy coordination with, 113

      • foreign aid inflows and, 101

      • future challenges for EAC integration, 8

      • liquidity forecasting, 116

      • liquidity management, 278

      • macroeconomic factors influencing, 113, 114f

      • reserve money targeting, 135, 136–137

      • responses to food and fuel shocks, 6

      • strategies for strengthening transmission mechanism, 6

      • transmission mechanism, 6, 115–117

      • See also Harmonization of monetary policy; Monetary transmission mechanisms

    • Monetary Protocol, EAC, 7

    • Monetary transmission mechanisms

      • asset price channel, 140

      • capital controls and, 155

      • channels of, 137–138, 137f

      • credit channel, 139–140, 148–149

      • current conceptualizations of, 134–135

      • data generation for strengthening, 155

      • data sources, 141–142

      • definition, 133

      • in EAC, 135, 153–154

      • exchange rate channel, 139

      • expectation channel, 140

      • interest rate channel, 138–139, 153

      • in low-income versus developed economies, 134

      • macroeconomic environment and, 6, 115–117, 116f

      • modeling methodology, 140–143

      • money channel, 138

      • projected outcomes of EAC policies, 143–153

      • significance of, in economic integration, 133–134

      • sources of weakness in, 114–115

      • strategies for strengthening, 154–155

    • Monetary union, EAC

      • benefits of, 2, 159–160

      • budget execution regimes and, 94–95, 95f

      • challenges for fiscal policy design, 61–62, 71

      • in context of African economic integration, 79, 81

      • convergence after, 53, 70

      • convergence criteria compared with other monetary unions, 41–44, 50–51, 58–61t, 74–75

      • convergence in preparation for, 39, 41, 70–71

      • current state of, 1, 61, 199

      • effects on exchange rates, 192–195, 193f, 194t

      • exchange rate policies for transition to, 6–7

      • harmonization of monetary policy in transition to, 6, 199, 100, 103, 119, 133

      • historical evolution of, 1, 99

      • implications for national fiscal institutions, 86–87, 88f

      • institutional readiness for, 73, 78

      • intraregional financial flows and, 226

      • intraunion competitiveness and trade after, 187–189, 190, 192–195, 193f

      • issuance of supranational bonds in, 80–81

      • key fiscal institutions for, 87

      • medium-term budget frameworks in support of, 91–92, 98

      • national risk management mechanisms for, 89–90, 90f

      • national rules in support of, 87–89, 89f

      • new entrants, 192–193

      • phases in transition to, 160, 160f

      • postadoption considerations, 79–81, 824

      • preparations for transition to, 39, 41, 190–191

      • recommendations for improving national fiscal institutions for, 96–98

      • regional financial cooperation for, 85

      • regional stabilization fund in, 81

      • risk-sharing mechanisms, 80–81

      • significance of monetary transmission mechanisms in, 133–134

      • surveillance and enforcement in, 79–80, 87, 95–96, 197

      • system of intergovernmental transfers in, 80

      • timetable, 72–73, 77, 99

      • top-down budget preparation and, 92–94

      • See also Convergence; Exchange rate policy in transition to monetary union; Harmonization of monetary policy

    • Monetary Union Protocol, 11

    N

    • Nairobi Stock Exchange, 242, 246, 256, 269

    • National Bank of Rwanda, 112, 117, 119, 119, 202, 282

    • National fiscal institutions

      • budget execution, 94–95, 95f

      • implications of monetary union for, 85–87, 88f

      • key elements for monetary union, 87

      • medium-term budget frameworks, 91–92, 92f, 98

      • national rules in support of monetary union, 87–90, 90f

      • recommendations for EAC monetary union, 97–98

      • reporting regime, 95–96

      • for risk management, 89–90, 90f

      • top-down budgeting process, 92–94

    • Natural resources. See Nonrenewable resources

    • Netherlands, 223

    • Nonbank financial sector

      • crisis management arrangements, 278–279

      • in EAC, 31, 227–228, 264, 267–269

      • financial stability analysis, 207–208

      • monitoring capacity, 7

      • risks and vulnerabilities, 272–273

      • supervision, 201

    • Nonrenewable resources

      • Dutch disease, 9, 161, 187, 188–189, 190, 195–196

      • fiscal management and surveillance, 46–47, 78

      • fiscal policy recommendations, 4

      • future challenges and opportunities for EAC, 8–9, 34

    O

    • Official development assistance, 17, 18f

    P

    • Payments and settlements systems

      • benefits of upgrading, 237–238

      • cost of cross-border transfers, 228

      • current infrastructure, 204–204

      • findings from Financial Sector Assessment Programs, 281–282

      • regional system, 211, 281–282

    • Pension systems

      • current EAC, 227, 235, 267, 268t

      • findings from Financial Sector Assessment Programs, 275

      • oversight in EAC, 204, 275

      • recommendations for cross-border coordination, 237

      • risks and vulnerabilities, 272

    • Per capita GDP

      • sustained growth versus nonsustained growth, 16, 16t

      • trends in EAC, 2, 3t, 12f

    • Per capita income

      • convergence in EAC, 54, 54f

      • poverty reduction and, 13

      • trends in EAC, 1, 11

    • Population

      • cross-border movement, 224–226, 225t

      • trends in EAC, 3t

    • Poverty

      • future prospects, 13

      • trends in EAC, 11, 12f

      • Price channels of monetary policy transmission, 140

    • Prime Bank, 229

    • Productivity

      • economic growth and, 17, 17f, 22–23, 23f

      • recommendations for growth acceleration, 36

    • Property registration and regulation, 286

    • Public debt

      • characteristics of defaulting countries, 49

      • convergence criteria, 2, 42, 47–48, 72–74, 75, 76–78

      • convergence in EAC Treasury bill markets, 250–251, 250t, 251t, 250–254, 249f, 251t, 253, 256, 257

      • current EAC compliance with convergence criteria, 47–49, 48f

      • current EAC market characteristics, 241–242, 241t, 242t

      • findings from Financial Sector Assessment Programs, 282–283

      • net and gross, 79

      • trends in EAC, 3t, 62, 68f, 68t, 69, 8

    R

    • Real-time gross settlement, 205–206, 211, 244, 281

    • Refugees, 226

    • Regulation

      • capital account liberalization to promote financial integration, 245–246

      • challenges of regional financial integration, 277

      • findings from Financial Sector Assessment Programs, 273–280, 282

      • harmonization of, for financial integration, 1201, 211, 246, 270b, 282

      • insurance industry, 203–204

      • long-term financing markets, 287

      • microprudential, 208–210

      • nonbank financial institutions, 275–277

      • securities market, 201, 230–231

      • See also Supervision and monitoring

    • Remittances, 220–222

    • Reserve money program, 136–138, 154

    • Reserves

      • adequacy of, 52

      • banking system liquidity, 269

      • central contingency, 96, 97

      • convergence criteria, 2–4, 50–52

      • current monetary policy targeting in EAC, 135, 136–137

      • EAC requirements, 119–120, 120f

      • recommendations for monetary policy harmonization, 122

      • strategies for strengthening monetary transmission mechanisms, 154, 155

      • trends in EAC, 3t, 5t, 51f, 52

    • Risk assessment and management

      • contagion from foreign-owned banks, 229–231, 236–237

      • credit market vulnerabilities, 271

      • current shortcomings in EAC, 221–222

      • Financial Sector Assessment Programs, 271–272

      • financial stability analysis, 207–213

      • financial supervision in EAC, 203

      • lessons from global financial crisis, 214–216

      • recommendations for EAC financial supervision, 2220, 237–238

    • Rwanda

      • poverty reduction in, 11, 13

      • projected monetary policy outcomes, 148–149, 148f, 149f

      • recent economic growth, 2, 11, 15, 22, 35

      • See also East African Community (EAC)

      • Rwanda Stock Exchange, 243

    S

    • Saudi Arabia, 223

    • Secretariat, EAC, 8, 44

    • Securities and stock markets

      • capitalization trends, 4t

      • characteristics of, in EAC countries, 234–235, 234t, 242–243, 243t, 258, 268–269, 269f, 273f

      • convergence in EAC, 254–257, 255t, 256t, 258

      • findings from Financial Sector Assessment Programs, 276–277, 282–284

      • fiscal reporting in EAC, 98

      • harmonization of oversight, 205

      • investors in EAC, 243–245, 243t

      • performance in EAC, 249t

      • recommendations to advance financial integration, 8

      • regional integration, 234–235, 246

      • regulatory oversight, 205, 208, 210

      • risks and vulnerabilities, 269

    • Small- and medium-sized enterprises, 267, 286

    • South African Customs Union, 108, 109

    • South African Development Community, 74–75, 81

    • Stanbic/Standard Bank, 228, 229

    • Standard Chartered Bank, 228, 229

    • Stress testing, 207, 271, 272

    • Supervision and monitoring

      • after monetary union, 84, 91

      • of banking, 202–203, 274–275

      • challenges of regional financial integration, 7, 198, 275

      • contagion risk management, 7, 236–237

      • crisis management and, 212–213

      • current EAC capacity, 201–206, 221–222, 227, 236–237

      • in financial stability framework, 201

      • findings from Financial Sector Assessment Programs, 274–282

      • of fiscal balances, 46–47, 74, 76, 82

      • of fiscal convergence criteria compliance, 86

      • fiscal reporting to support monetary union, 95–96

      • harmonization of frameworks for, 201, 270b

      • insurance sector, 203–204, 276

      • lessons from global financial crisis, 214–216

      • macroprudential, 214–215

      • of microfinance institutions, 204

      • microprudential, 208–210

      • of nonbank financial sector, 201, 275–277

      • of pension sector, 204, 275

      • recommendations for EAC, 222, 237–238

      • risk-based, 203, 227

      • of securities sector, 205, 208, 210

      • structure in monetary union, 201

    • Supervisory colleges, 209–210, 210b, 222, 277

    T

    • Tanzania

      • poverty reduction in, 11, 13

      • projected monetary policy outcomes, 149–151, 150f

      • recent economic growth, 2, 11, 15, 22, 35

      • See also East African Community (EAC)

    • Taxes

      • composition in EAC, 65, 66f, 67t, 81

      • harmonization rationale, 79

      • progress toward EAC harmonization, 62

      • recommendations for cross-border coordination, 237

      • revenues in EAC, 65, 66, 66f, 67t

      • value-added, 61, 79

    • Telephone infrastructure, 20, 20f, 27, 27f

    • Trade

      • benefits of regional integration, 2

      • convergence in EAC, 54–55, 78–79

      • EAC exports, 55, 56f, 222

      • EAC intraregional, 219–220

      • EAC openness, 218

      • EAC partners, 218–219

      • EAC patterns and trends, 5t, 32, 33f, 218–220

      • effects of monetary union on, 187–188, 190, 192–195, 193f

      • export-to-GDP ratio, economic growth and, 21, 22f, 32, 33f

      • obstacles to external competitiveness in EAC, 32–34

      • recommendations for growth acceleration in EAC, 36–37

      • spillover effects of Great Recession, 8

      • tariff rates, 54–55

      • See also Customs union, EAC

    • Treasury bills and bonds, 241–242, 241t, 242t, 248–249, 249t, 250–251, 250t, 251t, 253–254, 253f, 257, 258, 259

    • Treaty for the Establishment of the East African Community, 1

    • Trilemma proposition, 163–164

    U

    • Uganda

      • poverty reduction in, 11, 13

      • projected monetary policy outcomes, 151–152, 151f

      • recent economic growth, 2, 11, 15, 22, 35

      • See also East African Community (EAC)

    • Uganda Securities Exchange, 242–243, 246, 256, 277

    • United Arab Emirates, 223

    • United Kingdom, 223

    • United States, 223

    V

    • Value-added taxation, 61, 80

    • Vector autoregression

      • findings from monetary transmission analysis, 143–153

      • monetary transmission modeling methodology, 140–143

    W

    • West African Economic and Monetary Union, 41–44, 57–60t, 74–75, 86, 88, 91, 92–93, 94, 96, 98, 134

    • West African Monetary Zone, 41–44

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