Determining the Role of Single Currency for Countries Economic Development: A Case Study of the East African Community

Abstract

Since the reintroduction of the East African Community (EAC), there has been a clamor for the establishment of a single currency. This is due to the effect of multiple currencies in cross-border transactions, which has caused the value of goods and services to rise.  Just like some countries within the European Union have some. While it may be ideal, a critical feasibility study is required to determine the role of a single currency in driving EAC economic development. The single currency will serve as a means of payment for cross-border trade and payments, familiarize the public with the benefits of monetary integration, and encourage EAC monetary policy coordination. The study was centered on a single research question: what role does a single currency play in EAC economic development? The study was based in Arusha city the headquarter of EAC. According to the findings of the study, the majority of respondents are well-versed in the factors that encourage EAC member countries to pursue the adoption of a single currency for economic development. These factors include and not exhaustive: enhancing currency stability, reduction of financial risks, reduction of transaction cost, reduction of exchange rate fluctuation, enhancing price transparency and reduction of inflation that impact on trade within the region. According to the study, in order for effective integration to occur, it is necessary to investigate various monetary union models, design the integration process, and put in place a mechanism for gradually implementing monetary integration.