Distr.
LIMITED
CS/TCM/MERP/VIII/6
October 2010
Original: ENGLISH
COMMON MARKET FOR EASTERN
AND SOUTHERN AFRICA
Eighth Meeting of the COMESA Monetary and Exchange
Rates Policies Sub-Committee
Lusaka, Zambia
18-19 October, 2010
REPORT OF THE EIGHT MEETING OF THE
COMESA MONETARY AND EXCHANGE RATES POLICIES
SUB-COMMITTEE
10 (IZ-mmn)
CS/TCM/MERP/VIII/6
Page 1
A.
INTRODUCTION
1.
The Eight Meeting of the COMESA Monetary and Exchange Rates Policies SubCommittee was held from 18 to 19, October 2010 in Lusaka, Zambia. The sub-Committee
reviewed the activities that were undertaken based on its 2010 Workplan and prepared a
Workplan for 2011.
B.
ATTENDANCE OPENING OF THE MEETING,, ELECTION OF THE BUREAU,
ADOPTION OF THE AGENDA AND ORGANISATION OF WORK
2.
The meeting was attended by representatives from Congo (D.R.) Egypt, Kenya,
Mauritius, Malawi, Swaziland, Sudan, Uganda Zambia and Zimbabwe. The list of
participants is at Annex I.
Opening of the Meeting (Agenda item 1)
3.
The Chairman of the meeting, Dr. Adam Mugume, Director of Research in Bank of
Uganda on behalf of Dr. Pollycarp Musiguzi, Executive Director, Governor’s Office, Bank of
Uganda welcomed the delegates to the meeting and called the meeting to order. He
expressed his confidence that the Sub-Committee would come up with concrete proposals
to move the COMESA Monetary Cooperation Programme forward.
Election of the Bureau ( Agenda item 2)
4.
The following countries were elected as Bureau members:
Chairperson:
Vice Chairperson:
Rapporteur:
Uganda
Congo (D.R.)
Malawi
Adoption of the Agenda and Organisation of Work (Agenda Item 3)
5.
The Meeting adopted the following agenda:
(i)
(ii)
(iii).
(iv)
(v)
(vi)
Opening of the Meeting
Election of the Bureau
Adoption of the Agenda and Organisation
Report of the Workshop on Multilateral Fiscal Surveillance for COMESA
Report on Training on Econometric Analysis of Macroeconomic Policies
Work plan for the Monetary and Exchange Rates Policies Sub-Committee for
2011
(vii)
Any Other Business
(viii). Adoption of the Report and Closure of the Meetings
C.
ACCOUNTS OF THE PROCEEDINGS
Report of the Workshop on Multilateral Fiscal Surveillance for COMESA (Agenda Item
4)
6.
The Secretariat made a presentation under this agenda item. The meeting was
informed that a joint workshop for Central banks and Ministries of Finance was held from
16 to 17, December 2009, in Mauritius in collaboration with African Development Bank
(AfDB) and under the aegis of the Regional Multidisciplinary Centre of Excellence (RMCE).
The meeting was also informed that East African Community (EAC), Economic Community
for West African States (ECOWAS), European Central Bank (ECB), International Monetary
CS/TCM/MERP/VIII/6
Page 2
Fund, (IMF), West African Monetary Institute (WAMI), Southern African Customs Union
(SACU), shared their experiences on multilateral fiscal surveillance during the meeting.
7.
The meeting further informed that the Objectives of the workshop were:
(i)
(ii)
To ensure more rigorous budgetary discipline through surveillance and
coordination of budgetary policies in the member States of COMESA.
To achieve budgetary position in member countries that safeguard against
breaching the agreed upon convergence criteria and ensure the long term
sustainability of public finances;
(iii)
Bring together leading experts from EU, WAMI, ECOWAS, Secretariat etc. to
discuss and draw experiences from the continent and other regions.
(iv)
Promote partnership with AfDB, UNECA, AU and other RECs, to push this
agenda forward.
8.
The meeting was briefed
workshops:
1.
on
the following issues that were discussed in the
The Trends of Fiscal Reforms in COMESA Member Countries
9.
The following were the trends that were observed in fiscal reforms in COMESA
member countries in recent years
(i)
(ii)
(iii)
(iv)
(v)
(vi)
(vii)
(viii)
(ix)
(x)
(xi)
2.
The fiscal framework of member countries aim at striking the right balance
between supporting growth and maintaining medium term debt sustainability;
Sustained efforts are being made to improve coordination of monetary and
fiscal policies;
Sustained efforts are being made to widen tax base and improving tax
administration;
Sustained efforts are being made to use high concessional borrowing
effectively to avoid debt distress;
Member countries are introducing debt management strategies;
Member countries are introducing PFM medium term action plan to support
budget preparation;
Sustained efforts are being made for medium term expenditure framework
(MTEF) which focuses on creating space for higher capital spending;
Member countries are making every effort for creating fiscal space to
increase spending on infrastructure;
Member countries are restraining non-priority spending, and making spending
more efficient;
Member countries are designing appropriate measures to mitigate external
shocks such as increase in food prices, oil prices and global financial and
economic crisis; and
Member countries are making sustained efforts to provide for measures to
cushion the initial shocks of adjustment on the living standards of the poorest
groups through social safety nets;
Challenges to be addressed to implement Multilateral Fiscal Surveillance
10
The following are the challenges that were identified by RECs as regards their
experiences in conducting multilateral fiscal surveillance:
CS/TCM/MERP/VIII/6
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(i)
Lack of comparable, timely and reliable data to facilitate surveillance which
will lead to difficulties in monitoring performance;
(ii)
External shocks;
(iii) Lack of appropriate compensation mechanism to address variations in initial
conditions (e.g., compensating countries for loss in revenue due to trade
liberalization);
(iv) Lack of adequate enforcement mechanism;
(v)
Lack of credible commitments to fiscal sustainability;
(vi) Failure to incorporate the regional convergence criteria in national economic
programmes;
(vii) Overlapping membership;
(viii) Weak institutional capacity;
(ix) Limited resources to support adequate institutional and technical
mechanisms;
(x) Pressure on the budget of member countries not to comply to fiscal rules as a
result of fiscal implications of external shocks, such as the global financial and
economic crisis, food price increases, stimulus packages, rescue plans etc.
3
The case for Fiscal Rules for Promotion of Monetary Integration in
COMESA, EAC and SADC.
11
The meeting was informed that fiscal rules were useful devices to ensure fiscal
discipline among countries. It was pointed out that effective implementation of fiscal rules
require a robust legal basis, a clear definition of institutional responsibilities; transparent
accounting, and timely and comprehensive reporting of national government operations.
Fiscal rules can be specific quantitative targets or procedural rules which refers to mandated
processes and institutional requirements. The workshop also discussed the degree of
tightness of fiscal rules in COMESA, EAC and SADC.as regards, the strength of fiscal rules,
legal enforcement basis, enforcement institution, fiscal convergence targets and stages.
4.
The Case for Tripartite Arrangement for Fiscal Policy Cooperation in
COMESA, EAC and SADC
12.
The meeting was informed that the workshop discussed the following areas in the
fiscalcooperation among COMESA, EAC and SADC to achieve fiscal convergence:
(i)
(ii)
(iii)
(iv)
(v)
(vi)
(vii)
A framework for fiscal policies of EAC, COMESA and SADC member States
is necessary for monitoring and supervising the deficits and debt of each
member country on an annual basis;
Need for a structured reporting procedures, and enforcements and sanctions;
Timely submission of reports on performance of convergence programme;
Need for great involvement of fiscal affairs Committees often drawn from
Ministries of finance and economic development in surveillance of
performances of fiscal and other macro-economic convergences criteria;
Need to develop early warning system;
Comprehensive study on multilateral fiscal surveillance ; and
Need for political will and strong commitment.
13.
The meeting was also informed that the workshop discussed the following proposed
procedures on fiscal coordination and surveillance within the Tripartite Arrangement of
COMESA, SADC and EAC.
(i)
(ii)
Need to have Common fiscal Programmes;
Provision of information to the Tripartite Secretariat;
CS/TCM/MERP/VIII/6
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(iii)
(iv)
(v)
(vi)
(vii)
(viii)
(ix)
The implementation of the Tripartite procedural framework should revolve
around the Tripartite Summit; a Tripartite Council of Ministers; and a
Tripartite Secretariat of the three RECS; and
The Tripartite Secretariat shall constitute a framework for dialogue between
the Member States and the institutions and amongst the Member States,
playing a crucial role in developing and engraving a mechanism of peer
review and peer pressure;
Need to agree on realistic and credible data for margins for customs union
and forming one customs union and a common market;
Need for a harmonized convergence criteria for the three RECs;
All Member States should be required to submit to tripartite secretariat
medium term programmes on the budgetary position as well as economic
outlook on what they base their budget plans;
The programme should be assessed by the tripartite secretariat as well as
the fiscal and monetary committee for peer review and pressure;
Institutionally, the implementation of the tripartite procedural framework
should evolve around the interaction of the Member States with three
actions:
-
The tripartite Summit
The tripartite Council of Ministers
The tripartite Secretariat of the three (3) RECs.
14.
The meeting was informed that the following recommendations were made by the
workshop to enhance implementation of Multilateral Fiscal Surveillance in the COMESA
region:
(i)
(ii)
(iii)
(iv)
(v)
(vi)
Need for structured reporting procedures and enforcements mechanisms;
Timely submission of reports on performance of convergence programme;
Need to develop early warning system;
Comprehensive study on multilateral fiscal surveillance for COMESA;
Need for political will and strong commitment; and
COMESA Infrastructure Fund to urgently address issues regarding poor
infrastructure in the region;
15. The following were recommended by the Workshop to enhance effectiveness of
fiscal policy for domestic resource mobilization:
(i)
(ii)
(iii)
(iv)
(v)
(vi)
(vii)
(viii)
Improvement in the composition and control of expenditure by introducing
programme based budgeting ;
Undertaking improvements in tax administration and tax structure
Enhancing revenue from exploitation of natural resources;
Using revenues from natural resources in such a way that prevents negative
impact on the domestic economy, such as Dutch disease effects, excess
liquidity; and inflationary pressures;
Increasing public investment on economic and social infrastructure and
stimulate private investment
Strengthening domestic financial institutions;
ODA should be much more directly tied to the financing of domestic
investment, particularly in order to expand productive capacities and generate
higher rate of growth.
To avoid fluctuation and unpredictability in ODA, there is need for longer –
term commitments of aid from both bilateral and multilateral donors.
CS/TCM/MERP/VIII/6
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(ix)
(x)
5
Lengthening the time of commitment of ODA would be necessary in order to
strengthen government capacity to mobilise domestic revenues.
Encouraging remittances. Remittances have significant impact on poverty
reduction;
Implementing policies that reduce capital flight
Action Plan for 2010
16. The meeting was informed that the workshop recommended the following activities to
be carried out in 2010.
Activity
Responsibility
1. Preparation of MultilateralCOMESA
Surveillance Framework
for COMESA
1. Preparation OF Legal COMESA
Framework
for
Multilateral
Fiscal
Surveillance
in
COMESA
2. A high level publication COMESA+AfDB
of the proceedings of
the Workshop
3. Field Missions to other COMESA+AfDB
RECS which have
experience
on
multilateral
fiscal
surveillance
4. Harmonisation
of Tripartite Task Force
Macroeconomic
convergence
criteria
among
COMESAEAC-SADC
5. Follow up workshop on COMESA/RMCE/AfDB
Multilatreral
Surveillance
for
COMESA
Completion Date
July 2010
July 2010
July 2010
March 31, 2010-July 31, 2010
July 2010
August/September 2010
17.
The meeting was also informed that a AfDB in collaboration with COMESA undertook
the study. The findings of the study will be validated in a joint workshop for COMESA Fiscal
Affairs Committee and the Committee of Finance and Monetary Affairs in November 2010.
The meeting was also informed that after validation, the study will be presented to a Joint
meeting of the COMESA Ministers of Finance and the COMESA Committee of Governors of
Central banks for endorsement of the recommendations.
18.
The meeting noted the report of the Workshop
CS/TCM/MERP/VIII/6
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7. Recommendation
19.
The Committee on Finance and Monetary Affairs should take note of the issues
discussed in the workshop pending the holding of a Joint Validation Workshop with Fiscal
Affairs Committee in which it will deliberate on the findings of the study, the recommendation
of which will be submitted to an extra-ordinary joint meeting of the COMESA Ministers of
Finance and the COMESA Committee of Governors of Central Banks.
Report on Training Workshop on Econometric Analysis of Macroeconomic Policies
(Agenda item 5)
20. The meeting was reminded that the 12th Meeting of the COMESA Committee of
Central Bank Governors held in Tripoli, Libya in November 2007, decided that the COMESA
Secretariat should organize a training workshop for member countries, in order to enable
them to undertake econometric analysis of macroeconomic policies independently. In pursuit
of this decision, the Secretariat organized the training from 11-15, August 2008, in Lusaka,
Zambia on the design, building and use of quantitative economic policy tools, with particular
reference to the econometric studies on exchange rates, monetary policies and inflation in
the COMESA region, which were undertaken by the COMESA Monetary and Exchange
Rates Policies Sub-Committee from 2007-2009. The Secretariat again organised the same
training from 31st May 2010 to 4th June 2010 in Lusaka, Zambia.
21.
The meeting was informed that the main objective of the workshop was to help
participants have hands on training on the use of quantitative analytical methods for the
formulation and implementation of better-informed and more consistent development
policies. This would indeed assist to achieve the following:
(i)
(ii)
(iii)
(iv)
22.
Create capacity among central banks to assess extent of real exchange rate
misalignments as countries gear up to join the exchange rate mechanism (ERM)
that will have to be in place before 2018 when the COMESA Monetary union will
be established.
Determine empirically, the most crucial relationships which make up the
COMESA economy, particularly with respect to the driving forces of growth,
exchange rates, inflation, and private investment.
Developing consistency frameworks for policy coherence and harmonization
within and among COMESA member countries. Of particular importance is for
countries to have the capacity to be able to establish monetary policy
transmission channels/mechanisms within COMESA as the region moves
towards becoming a single monetary zone with monetary policy conducted by a
supranational central bank;
Enhance effectiveness of the COMESA Secretariat in policymaking and policy
advice.
The training discussed the following among others:
(i)
(ii)
(iii)
(iv)
(v)
(vi)
Introductions to E-views
Regression Analysis
Time series econometric theory
Cointegration Analysis

Practical Session on Determinants of REER
Error Correction Mode

Practical Session on Modelling Inflation
Structural Vector Auto-regression Model
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
Practical Session on Modelling the Credit Transmission Channel
Modelling Panel data

Practical Session on Modelling the Determinants of Industrial
Investment
In the practical sessions the participants analysed the following:
(vii)
23.
(i)
(ii)
(iii)
(iv)
The determinants of the real effective exchange rate in Zambia.
Estimated an Error Correction Model of the determinants of inflation in Malawi
Analyzed the credit channel of transmission in Zambia .
Regarding modelling panel data the participants analyzed the determinants
of investment in the auto-industry.
24.
The meeting was informed that in the wrap up session the participants very much
appreciated the course since they learnt a lot of econometric tools that would help them in
policies analysis especially in respect of monetary policy transmission, real exchange rate
misalignments and other macroeconomic policies.
25.
The participants appreciated the able manner in which the resource persons
conducted the training. The participants, however, felt hat the one week allocated for the
course was not enough to grasp all the theoretical and practical issues. They therefore
proposed that a minimum period of two weeks would be adequate to cover both theory and
the practical exercises.
Recommendation
26. The meeting recommended the following:
(i)
(ii)
The future training workshop should be for a minimum period of two (2)
weeks; and
There is need to hold two separate workshops. One should target Junior staff
and the other senior staff of central banks and Ministries of Finance. The one
for senior staff should focus on building national macroeconomic models
which is a precursor of building regional macroeconomic model. The other for
junior to mid level staff should focus on economic analysis of macroeconomic
policies
Work Plan of the Monetary and Exchange Rate Policies Sub-Committee for 2011
(Agenda item 6)
27.
The Sub-Committee proposed the Work Programme for the year 2011as outlined in
the table below.
No.
Theme
1.
Promote
Monetary
Integration
Activity
Responsibility
Completion
date
i. Endorsement of the COMESA
March 31,
recommendation
of Secretariat
and 2010
the
study
on member countries
multilateral
fiscal
surveillance
by
COMESA Ministers of
Finance and Central
Bank Governors
ii. Implement
activities
July 2011
CS/TCM/MERP/VIII/6
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2.
3
Capacity
building
Sensitisation v.
of
the
COMESA
Monetary
Integration
Programme
contained in the road
map for multilateral
fiscal
surveillance
framework
iii. Study on Evaluation of
the implementation of
the first phase of the
COMESA
Monetary
Cooperation
Programme for the
period from July 200731st st December 2009
iv. Publish
research
paper
i. Training
of COMESA
econometric analysis
of macropolicies for
Junior to middle level
staff of Central banks
and
Ministries
of
Finance;
ii
Training
on
macroeconomic
modeling
and
forcasting, for senior
experts in Ministries of
Finance and Central
Banks
July 2011
June-July,
2011
Hold
sensitization COMESA
and June 2011
workshops
on Member countries
Monetary Integration
in member countries
Any other Business (Agenda item 7 )
28
No issues were raised under this Agenda item.
Adoption of the Report and Closure of the Meeting ( Agenda item 8)
29.
The meeting adopted its report with amendments.
30.
The meeting adopted its report with amendments.
31.
In closing the meeting the Chairman of the Sub-Committee thanked the
delegates for their useful contribution and wished them safe journey back home.
CS/TCM/MERP/VIII/6
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32.
Mr. Dennis G. Mburu, First Secretary (Economic) Kenya High Commission
moved a vote of thanks on behalf of the delegates. He thanked the Chairperson for
the excellent manner in which she steered the meeting. He also thanked the
Secretariat for the excellent logistical support which contributed to the success of the
meeting. He also thanked the interpreters and the COMESA Secretariat staff for the
job well done.
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Annex I
LIST OF PARTICIPANTS
D.R. CONGO
Matondo-Mbwangi-Jose, Responsable de service des financier Publiques, Banque central
du Congo; B.P. 2697, Kinshasa Gombe Tel: +243 898205477; Email:
[email protected]
Molongya Sekila, Economiste Charge d’Analyse au Service nonnaie et Crédit, Banque
Centrale Du Congo; B.P. 2697, Kinshasa Gombe Tel: +243 998436233/0817848081; email:
[email protected] / [email protected]
EGYPT
Mohamed M. Afify Allam, General Manager, Central Bank of Egypt, 54 Gomhoria Street,
Central Bank Building, Cairo; Tel: +20102269712; Email: [email protected]
Yousry M. Abd El-Rahaman Yousef, Assistant Manager, Central Bank of Egypt, 54
Gomhoria Street, Central Bank Building, Cairo; Tel: +20101256654; Email:
[email protected]
KENYA
Dr. Daniel M. Amanja, Assistant Director, Research , Central Bank of Kenya, P.O. Box
60000 – 00200, Nairobi, Tel: +254(20) 2863202; Email: [email protected];
Mr. Dennis G. Mburu, First Secretary (Economic) Kenya High Commission, P.O. Box 50298,
Lusaka, Tel: 0979 433450; Fax: 253829, Email: [email protected]
MALAWI
Mr Rodrick Wiyo, Manager, Financial Markets, Reserve Bank of Malawi, P.O. Box 30063,
Capital City; Tel: +265 (1) 770600; Fax: 265 1 772219; email: [email protected]
MAURITIUS
Mr. Jugoo Satishingh, Analyst, Bank of Mauritius, Royal Street, Port Louis, Tel: +230
2065626 email: [email protected]
SUDAN
Dr. Nagmeldin Hassan Ibrahim, Deputy Director, Policies Department, , Central Bank of
Sudan, Gamaa Street, P.O. Box 313 Khartoum; Tel: +249187056105; Fax: +249
183781341; Email: [email protected]
Ammar Ahmed Mohamed Ahmend, Central Bank of Sudan, P.O. Box 313 Khartoum; Tel:
+249 9 22566979; Fax: +249 183781341; Email: [email protected]
SWAZILAND
Mr. Patrick Ndzinisa, Manager, Policy Research & Macroeconomic Analysis, Central Bank of
Swaziland, P.O. Box 546, Mbabane, Tel: +268 408 2204; Fax: +268 4040038; email:
[email protected]
CS/TCM/MERP/VIII/6
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UGANDA
Dr. Polycarp Musinguzi, Executive Director, Governor’s Office, Bank of Uganda, P.O. Box
7120, Kampala, Tel: +256 0772 798 798; Fax: +256 0414 345307; Email:
[email protected]; [email protected]
Dr. Adam Mugume, Director Research, Bank of Uganda, P.O. Box 7120, Kampala; Tel:
+256 414 230791; Fax: +256 414 230 791; email: [email protected].
Ms. Prose Kuteesa, Head External Sector Policy Section, Bank of Uganda, P.O. Box 7120,
Kampala; Tel: +256 414 258 441/6; Fax: +256 414 254 760; email: [email protected].
ZAMBIA
Noah Mutoti, Assistant Director, Economics Department, Office of Deputy Governor –
Operations, Bank of Zambia P.O. Box 30080, Lusaka, Tel: +260 211 228888/ 228903; Fax:
+260 211 221189/226707; Email: [email protected]
Dr. Anthony Musonda Simpasa, Acting Manager , Market Studies, Bank of Zambia, P.O. Box
30080, Lusaka, Tel: +260 211 228888/ 228903; Fax: +260 211 237070; Email:
[email protected]
ZIMBABWE
Mrs. Stella Nyangweta, Trade Attache, Zimbabwe Embassy, Lusaka, Tel: +260 979900412;
Email: [email protected]
COMESA SECRETARIAT
Mr. Ibrahim Zeidy, Senior Monetary Expert, COMESA Secretariat, P.O. Box 30051, Lusaka;
Tel: +260 211 229725-31; Fax: +260 211 225107; Email: [email protected]
Dr. Martha Mutesayire, Translator, COMESA Secretariat, P.O. Box 30051, Lusaka; Tel:
+260 211 229725-31; Fax: +260 211 225107; Email: [email protected]
Ms. Mary M. Ndoti, Senior Secretary, COMESA Secretariat, P.O. Box 30051, Lusaka; Tel:
+260 211 229725-31; Fax: +260 211 225107; Email: [email protected]
INTERPRETERS
Mr. Paul Kaunda, Conference Interpreter (French & English) P.O. Box 320228, Woodland,
Lusaka; Tel: +260977154715; Fax: +260211 265831; email: [email protected]
Mr. Phillip K. Kaunda, Interpreter, P/B RW 50013X, Lusaka; Tel: +260977123429; Email:
[email protected]
Mr. Paul Kabasu, Conference Interpreter and Translator, Multilingual Conferences, Tel: +260
977 457126; Email: [email protected]; [email protected]