Governors: EA Economies now Suffering Second, Third Round Effects of Global Crunch

By Adam Ihucha
15th May 2009

East African central bank governors have changed tune on the impact of the global financial meltdown, now admitting that the threat to the region's economy was real and severe.
The latest turn of events comes as the five EAC partner states' central bank governors backtracked from their long-held optimistic view that their countries' economies were cushioned against the ravages of the financial crisis.
The banking regulators now admit that while the first round effects of the global financial crunch had minimum impact on their national economies, repercussions of the second and third rounds posed significant risks to their ailing economies.
In their just-ended meeting in Kigali, Rwanda, the five governors acknowledged that the region was currently facing the worst decline in export demand, a slowdown in foreign direct investment (FDI), external remittances and a decline in foreign aid to governments.
“Our economies are currently suffering from second and third round effects of the global financial crisis,” read a joint communiqué issued shortly after their meeting of the EAC Monetary Affairs Committee (MAC).
The governors underscored the need to strengthen financial sector surveillance with a view to unlocking information content of the off-balance sheet transactions in monetary and financial analyses.
They also recommended stress testing, critical monitoring of financial stability indicators, and the design of a regional institutional monitoring mechanism to facilitate generation of early warning indicators.
The crucial talks were hosted by National Bank of Rwanda and chaired by the bank's governor, François Kanimba.
They were attended by Prof. Njuguna Ndung'u, governor of the Central Bank of Kenya; Prof. Emmanuel Tumusiime-Mutebile, governor of the Bank of Uganda; Prof. Benno Ndulu, governor of the Bank of Tanzania and Gaspard Sindayigaya, governor of the Bank of Burundi.
The meeting was also attended by EAC Secretary General Juma Mwapachu.
MAC is East African Community's committee tasked with laying the foundation for a monetary union in East Africa.
SOURCE: THE GUARDIAN