East African central banks are keen on anchoring inflation expectations to reduce the cost of living and attempt to comply with the elusive macroeconomic convergence conditions for a single currency regime.These include a debt-to-gross domestic product (GDP) ratio of 50 percent, fiscal deficit (including grants) of three percent of the GDP, overall inflation of eight percent and forex reserves of 4.5 months of import cover.Worries over inflation and depreciation of local currencies have been at the centre-stage of influencing monetary policy decisions among regional central banks.Continued attacks in the Red Sea — through which 11 percent of global trade flows—and the on-going war in Ukraine provide new inflationary threats, with the risk of generating fresh adverse supply shocks to the global economic recovery.
The EA member states missed the initial deadline of implementing a monetary union that was 2024 and instead set new timelines of 2031.