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CS/TCM/MERP/V/5 April 2008

Original: ENGLISH

COMMON MARKET FOR EASTERN AND SOUTHERN AFRICA

Fifth Meeting of the Monetary and Exchange Rates Policies Sub-Committee

Lusaka, Zambia April 28 -30 2008

REPORT OF THE FIFTH MEETING OF THE MONETARY AND EXCHANGE RATES POLICIES SUB-COMMITTEE

(08)-nmn

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A. INTRODUCTION

1. The Fifth Meeting of the Monetary and Exchange Rates Policies Sub-Committee was held from 28 to 30 April 2008 in Lusaka, Zambia.

B. ATTENDANCE, OPENING OF THE MEETING, ADOPTION OF THE

AGENDA AND ORGANISATION OF WORK

2. The meeting was attended by representatives from Central Banks of Burundi, Congo (D.R.) Egypt, Kenya, Libya, Malawi, Mauritius, Rwanda, Swaziland, Sudan, Uganda and Zambia. Consultants also attended the meeting. The list of participants is at Annex I.

Opening of the Meeting (Agenda item 1)

3. The Chairperson of the meeting, Mrs. Nkusi Rose Kamariza, Board Advisor for Banque de la Republique du Burundi, called the meeting to order. She welcomed the delegates and expressed confidence that the Sub-Committee would come up with concrete proposals to move the COMESA Monetary Cooperation Programme forward.

4. Mr. Prakash Hurry, Acting Director of the Division of Trade, Customs and Monetary Affairs also welcomed the delegates on behalf of the Secretary General of COMESA, Mr. Erastus J.O. Mwencha. He highlighted the major developments in the preparation COMESA is undertaking towards launching the Customs Union in December 2008. He emphasized that the meeting should take this into account in its deliberations.

5. Mr. Ibrahim A. Zeidy, Senior Monetary Economist reminded the meeting that the 12th Meeting of the COMESA Committee of Governors of Central Banks, which was held in Tripoli, Libya, from November 8 to 9, 2007, reviewed three empirical studies which were undertaken by the Monetary and Exchange Rates Policies Sub-Committee. The Governors decided that the studies should be extended to more COMESA member countries which will provide the requisite data to undertake the study. He informed the meeting that arising from the decision of the Governors the COMESA Secretariat requested all member countries to submit their data in order to be included in the study. Based on the request, Burundi, Egypt, Kenya, Malawi, Rwanda, Sudan, Swaziland, Uganda and Zambia submitted their data.

6. He also informed the meeting that the Third Meeting of Experts on Acceptance of Each Other’s National Currencies by the Northern African Sub-Group, which includes Egypt, Libya and Sudan, agreed on an Action Plan for implementation of currency convertibility in the Northern African Sub-group.

7. He further informed the meeting that , the Twenty Fourth Meeting of the COMESA Council of Ministers reviewed the potential effects of unexpected decline of the dollar on COMESA Secretariat’s portfolio of assets. The Council, however, agreed on the complexity of the foreign exchange risk

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management and decided that the issue must first be discussed by the Monetary and Exchange Rates Policies Sub-Committee, which will make necessary recommendations to the COMESA Committee of Governors of Central Banks for appropriate decision.

Adoption of the Agenda and Organisation of Work

8. The Sub-Committee adopted the following agenda:

(1) Calling the Meeting to Order by the Chairperson

(2) Adoption of the Agenda and Organisation of Work

(3) Review of the following Final Studies:

(a) Empirical Analysis of the Departure of Actual Real Effective Exchange Rate path from their Equilibrium Exchange Rate Path in selected COMESA Member countries;

(b) Sources of Inflation in Selected COMESA Member countries;

(c) Comparative Study on the Transmission Mechanism of Monetary Policy;

(4) Foreign Exchange Risk Management for COMESA;

(5) Report of the Third Meeting on Arrangements for acceptance of Each Other’s National Currency by Egypt, Sudan and Libya

(6) Any Other Business; and

(7) Adoption of the Report and Closure of the Meeting

9. The meeting agreed on the following hours of work:

Morning: 9.00-13.00 hours Afternoon: 14.00-18.00 hours

C. ACCOUNTS OF PROCEEDINGS

Empirical Analysis of the Departure of Actual Real Effective Exchange Rate path from their Equilibrium Exchange Rate Path in selected COMESA Member countries ( Agenda item 3(a))

10. Under this agenda item, Dr. Christopher Kiptoo, presented to the meeting, the study which was undertaken by him and Dr. Polycarp Musinguzi.

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11. The objective of the study was to estimate equilibrium Real Effective Exchange Rate (REER) path for COMEA countries; determine the degree of REER misalignment; recommend necessary policy adjustments in case of misalignment, in order to be ready for the implementation of the Formal Exchange Rate Union Stage of the COMESA Monetary Integration Programme.

12. The theoretical framework for the study was based on two aspects that were considered to be important in respect of the choice of its analytical framework. These were: the theoretical aspects of REER determinants and the theoretical aspects relating to equilibrium REER and misalignments. With respect to REER determinants, the study pointed out that the long run determinants of REER were: terms of trade, government expenditure, trade policy/degree of openness, productivity/technological progress and capital and financial flows while the short run determinants were monetary policy and exchange rate policy. The study indicated that there are at least three categories that are used in the establishment of equilibrium REER, namely; the purchasing power parity approach, partial equilibrium approach (e.g. Fundamental Equilibrium Exchange Rate -FEER, Desired Equilibrium Exchange Rates -DEER, Natural real exchange rate -NATREX, Capital enhanced equilibrium exchange rates -CHEERS and Intermediate-term model-based equilibrium exchange rate -ITMEER) and general equilibrium approach (Behavioral equilibrium exchange rate -BEER, Permanent Equilibrium Exchange Rates -PEER, Atheoretical Permanent Equilibrium Exchange Rates -APEER, Structural Vector Auto Regression -SVAR and Dynamic Stochastic General Equilibrium -DSGE).

13. Monthly time series data for all the relevant variables was obtained for the period of liberalized exchange rate regimes. Both Augmented Dickey Fuller (ADF) and Phillips-Perron (PP) tests were employed to ascertain the integration order of all the variables in the REER Model. In the case of Uganda where some allowance was made for fractionally integrated processes, the Pesaran and Shin’s (1995) method based on an augmented Autoregressive Distributed Lag (ARDL) procedure was employed. The ADF and PP tests indicated that all the variables for Kenya, Malawi, Swaziland, Zambia, Burundi and Rwanda were integrated of order 1, i.e. I(1). To estimate the long-run relationship between the REER and its fundamentals for these countries, the Johansen cointegration technique was employed. A series of equilibrium REER s were derived using the parameters of the long run REER models estimated in order to assess the extent of RER misalignments. In this case, the actual misalignment was given as the difference between the fitted and the actual value of the REER. The study derived the Permanent Equilibrium Exchange Rates (PEER) by identifying long-run or sustainable values for the fundamentals through decomposing the series into permanent and transitory components using the Hodrick-Prescott (HP) filter. The long-term values of fundamentals derived using the HP filter were then substituted into the estimated relationship relating the REER to the fundamentals, and short-term variables were set to zero again. Total misalignment was then derived as the difference between the fitted and the actual value of the RER. The results indicate that:

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(a) Kenya experienced deterioration in its international competitiveness during the following periods when the REER was generally overvalued: September 1994 – June 1995; December 1995- January 1996; April 1996 – July 1997; December 1997 – April 1999; August 2000 – August 2000; March 2005 – May 2006; and January 1997-July 1997. On the other hand, Kenya’s REER generally remained undervalued, implying improvement in the country’s international competitiveness, during: January 1993 – August 1994; July 1995- November 1995; February – March 1996; August – November 1997; May 1999 – July 2002; and June 2006 – October 2006. In general, however, Kenya’s REER was undervalued by an average of 1.2%, implying a slight improvement in the country’s international competitiveness during the study period 1994-2006.

(b) Uganda’s REER misalignments were generally well within 2 standard errors or 5% level of significance. The episodes of real depreciations and appreciations of REER were well within 0.25 percent. In the recent period from October 2006 up to the first week of July 2007 when the nominal Uganda shilling/US$ experienced sharp appreciation pressures, Uganda’s REER Rate was slightly overvalued, by only 0.25 percent.

(c) Malawi experienced deterioration in its international competitiveness during the following periods when the REER was generally overvalued: January – September 1993; October 1996- August 2000; and January 2004 – June 2006. Malawi, however, experienced improvement in its international competitiveness during the following period when the REER was undervalued: October 1993 - September 1996; September 2000 – December 2003; and July 2006 – December 2006. The descriptive statistics shows that Malawi’s REER was on average undervalued by 0.81 percent during the study period, implying improvement in the country’s international competitiveness.

(d) Swaziland experienced a number of episodes of REER Misalignments during the study period 1994-2006. The country experienced deterioration in its international competitiveness during the following periods when the REER was generally overvalued: April 1994 – December 1998 and March 2003- October 2006. On the other hand, the country’s REER generally remained undervalued, implying improvement in the country’s international competitiveness, during the following periods: January – March 1993, January 1999- February 2003 and November - December 2006. Overall, Swaziland’s REER was undervalued by 2.28 percent, implying improvement in the country’s international competitiveness during the study period 1994-2006.

(e) Zambia experienced deterioration in its international competitiveness during the following periods when the REER was overvalued: January 1993- March 1994; March 2003- October 2006; October 1999 – November 1999; February 2000 –October 2000; October 2001-April 2002; and February 2005 –December 2006. On the other hand, Zambia’s REER remained undervalued, implying improvement in the country’s international

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competitiveness, during the following periods: June 1994 - September 1999; December 1999 - January 2000; November 2000 - January 2001; June 2001 - July 2001; and May 2002 - January 2005. Overall, Zambia experienced more episodes of REER overvaluation, implying deterioration in the country’s international competitiveness. This is reflected by the 1.9 percent overvaluation of the REER during the study period 1993-2004.

(f) Burundi experienced deterioration in its international competitiveness between the period May 1997 and December 2003 when the REER was generally overvalued. Burundi experienced REER depreciation, implying improvement in its international competitiveness during the following periods: January 1993 - April 1997; and January 2004 and

December 2006. In spite of having experienced more episodes of REER overvaluation compared to undervaluation, Burundi’s REER was undervalued by 6.3 percent, implying improvement in the country’s international competitiveness.

(g) Rwanda experienced improvement in its international competitiveness during the following periods: January 1996 - January 1997, May 1997 – April 2000 and December 2000 –January 2003. On the other hand, Rwanda experienced REER appreciation, implying improvement in its international competitiveness during the following periods: January 1995 - December 1995; February 1997 - April 1997; May 2000- November 2000; and February – December 2007. Rwanda had on average an appreciated exchange rate when compared to its average equilibrium value. This implies that Rwanda’s international competitiveness deteriorated over the study period.

(h) Egypt and Sudan – The data for most variables for estimating the equilibrium REER was availed to the consultants. However, the two countries were not included in the study due to lack of data for the following variables: Nominal Effective Exchange Rate, the Real Effective Exchange Rate, the Consumer price indices and Index of Industrial Production. These countries will be included in the study as soon as data for these variables are availed. The meeting was informed that Egypt had submitted the required data and documents to the consultant and gave him the website for Central Bank of Egypt, where he could find all the needed time series data; in monthly, quarterly or annual basis.

14. The study acknowledged that the assessment of equilibrium REER s for COMESA countries was not an easy task owing not only to model uncertainty related to the theoretical background and to the fundamentals chosen but also an array of methodological and statistical problems that complicated the undertaking of the study. In spite of these challenges, an assessment of the equilibrium REER s for COMESA countries was carried out based on the PEER approach and the study concluded that despite the adoption and implementation of liberalized exchange regimes in the many COMESA countries, success was not achieved as expected in restoring equilibrium in the REER. The results indicated that many countries experienced a number of episodes of REER overvaluation, implying

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deterioration in the respective country’s international competitiveness. As a rule of thumb, equilibrium REER estimates should be considered in the decision on the setting of the ERM central parity only if the majority of the estimates suggest that the exchange rate is misaligned by more than roughly 10%. The results of the study indicated that many COMESA countries experienced episodes of REER misalignment that were beyond the 10 percent threshold. The study, in this respect, pointed out that an immediate entry by COMESA countries to an Exchange Rate Mechanism (ERM) would be risky, as entering the ERM with a misaligned exchange rate, or setting the central parity at a level significantly different from the market level, would likely invite speculative attacks.

15. During the ensuing discussions, the meeting highly commended the consultants for an excellent job done in undertaking the study in spite of the limitations of data for many countries. The meeting made the following observations:

(i) The importance of harmonizing concepts and methodologies for compiling macroeconomic data to achieve comparability was highly emphasized;

(ii) The need for having high frequency data and a common framework for analysis was underscored;

(iii) Panel estimation encourages countries to have unification in methodological and conceptual issues relating to the variables employed;

(iv) Although panel estimations are good in this kind of study, individual country estimates are still important in order to identify the specific policy issues that each country has to implement before entering into a monetary union; and

(v) To enhance comparability, international sources of data such as IMF’s International Financial Statistics should be used. The need to move speedily towards the implementation of international manuals such as Balance of Payment Manual 5, 5NA 1993, Monetary and Financial Statistics Manual 2000 and GF5 Manual 2001.

Recommendations

16. The meeting recommended the need for the following:

(a) Conducting panel estimation, once individual country studies are complete. This requires sharing the respective data sets in order to have a general regional approach. In this case, efforts should be made to pool the data set across countries to facilitate panel unit root and cointegration as well as expand the degrees of freedom for data sets and use such pooled data to analyze the regional competitiveness of COMESA region.

(b) The speedy implementation of the recommendations of the seminar on harmonization of concepts, methodologies and statistical frameworks held in Nairobi, Kenya in April 3-7, 2006

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whose objective was to facilitate comparability of Statistical Data for the Implementation of the African Monetary Co-operation Programme (AMCP).

(c) Early correction of REER misalignments by each country is an important step for the design of the COMESA Exchange Rate Mechanism (ERM) under the COMESA Monetary Cooperation Programme.

(d) Employing the approaches of Autoregressive Distributed Lag (ARDL) model and the Permanent Equilibrium Exchange Rates (PEER) in the study for all countries. This would facilitated comparability of the finding for all selected countries;

(e) Having a common frequency of data on quarterly basis.

(f) Use of data from the IMF’s International Financial statistics (IFS) to achieve comparability.

(g) Speedy implementation of international manuals such as Balance of Payment Manual 5, SNA1993, Money and Banking Statistics Manual 2000, and GFS2001;

(h) Having a common framework for computing the NEER and REER (units of domestic currency per foreign currency). In this regard, varying weights should be used in the computation of REER in order to capture the dynamism in the structure of each country’s trade. Similarly weighted CPI for each country partners should be used in deflating the NEER to get the REER.

(i) To ensure exchange rate stability, policies (monetary and fiscal) must focus on ensuring overall macroeconomic stability.

(j) The study approved by governors in November 2007 on the impact of RER misalignments on exports, current account and output to be conducted in 2008, should pick up from the results of the current study on REER misalignments in COMESA countries.

Sources of Inflation in Selected COMESA Member countries ( Agenda item 3(b))

17. Under this agenda item, Dr. Noah Mutoti presented to the meeting, the study which was undertaken by him and Dr. David Kihangire. He informed the meeting that eight countries were included in the sources of inflation analysis owing to data limitations. His presentation covered; the theoretical framework and the methodology employed. He presented the empirical results as follows:

(i) In Zambia, long-run overall inflation is largely driven by supply factors and exchange rate. In the short-run it is on

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account of inflation inertia or expectation, money growth, supply of items and seasonal factors.

(ii) Output, money and exchange rate are the main driving force of long-run inflation in Malawi. In the short-run, it is driven by exchange rate, money supply, supply-side and seasonal factors

(iii) Long-run Swaziland inflation is determined by supply-side factors, exchange rate and modestly by money supply and South African price. In the long run, prudent monetary policy has the benefit of achieving and sustaining low inflation, in addition to high output growth and stable exchange rate.

(iv) For Madagascar long run inflation is largely influenced by output, money, exchange rates. Short run inflation is influenced by output, money exchange rate and seasonal factors.

(v) For Uganda, Kenya, Sudan, and Egypt, the determinants of long run underlying inflation are money, exchange rate, aggregate supply and world prices. The short run factors are inflation inertia, aggregate supply, money supply, exchange rates, world prices and seasonal factors.

18. He concluded that to combat inflation, the above findings demonstrate the need to pursue policies aimed at containing second-round effects of inflation arising from exogenous factors, sustained prudent monetary policy stance ; policies aimed at keeping the exchange rate stable and competitive; and policies to alleviate supply side constraints.

19. In the discussions that ensued the following observations were made:

(i) The need to include a variable to capture the issues of fiscal dominance;

(ii) There is need to examine the determinants of food and non-food inflation or underlying or headline inflation;

(iii) Institutional and structural rigidities should be considered in modelling;

(iv) The finding for Kenya that an increase in output leads to higher inflation and an increase in world price leads to lower inflation and thereby suggesting that the economy is overheating might not be consistent with expectations. This might have resulted from the use of M2 rather than M3 in the model.

(v) The finding for Sudan that money supply significantly influences inflation might not be consistent with the reality in Sudan, as low inflation has been recently observed despite high money supply growth. This could be explained by money supply not in excess of demand for money; and

(vi) The experience of Swaziland indicates that money supply is not a very important determinant of inflation. In addition, it is

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necessary to include labour market (i.e. wages) and capacity utilisation (to capture the output) as determinants of inflation.

Recommendations

20. The meeting recommended the following:

(i) Countries need to supply data on underlying and headline CPI or food and non-food CPI;

(ii) Policy strategies to control inflation should be broad based to cover issues of structural reforms vital to accelerate growth.

Comparative Study on the Transmission Mechanism of Monetary Policy (Agenda item 3(c))

21. Under this agenda item, Dr. Mutoti presented to the meeting, the study which was undertaken by him and Dr. Michael Antigi-Ego. He informed the meeting that twelve countries were included in the analysis. In his presentation, he highlighted the four channels of monetary policy transmission to inflation and output as the interest rate, money, exchange rate and credit channels. He also highlighted the econometric approach which was used. He said that the Structural Vector Auto Regression (SVAR) model was used because of its wide applicability to test hypotheses on the monetary transmission mechanism.

22. He presented the empirical results as follows:

(i) Most if not all countries implementing monetary targeting and thus the instrument of policy use money or base money.

(ii) The empirical results suggested the existence of the stable money demand, except in Swaziland and Madagascar.

(iii) The empirical results suggest evidence of the money or interest rate and exchange rate channels of monetary policy to inflation in Zambia, Malawi, Swaziland and Madagascar. However, there is strong support for the exchange rate channels of transmission to inflation than interest rate or money channels in Malawi, Swaziland and Zambia. The results further confirm the inability of monetary policy to affect output through the money channel. The issue of the credit channel is yet to be undertaken for, Madagascar, Malawi, Swaziland and Zambia

(iv) The analysis for Uganda, Kenya, Burundi, Rwanda and Sudan besides Ethiopia include credit to examine the credit channel .For Uganda, the empirical results suggest that underlying inflation is largely driven by its own innovation, credit and exchange rate shocks. Further, credit explains a larger share of CPI than reserve money. Overall, however, both

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reserve money and interest rate seem to have an identifiable transmission mechanism on consumer price.

(v) Using the 91-Treasury bill as a measure of monetary policy in Uganda, it was found that aggregate demand responds very little to changes in the lending rate due to low level of monetisation and financial intermediation.

(vi) For Kenya, it is suggested that CPI and output response to the monetary policy rate is quite faint. Variation in the CPI is largely attributable to exchange rate, credit, output and its own innovation. In case of reserve money as the policy instrument, a weak response of price and output to a monetary policy shock is suggested.

(vii) The findings for Egypt, suggested that the increase in the policy rate has no effect of output and price. Much of variation in the CPI is driven by exchange rate. Variation in output is attributable to exchange rate, M2, price and own innovations.

(viii) For Rwanda, a shock to base money causes a rise in price quite fast, while its impact on output is faint. Base money shocks seem to have a marginal effect on exchange rate and credit to the private sector where both act as transmission channels to mediate the effect of changes in monetary policy stance on output and price. Overall, credit seems to be playing a crucial role as an intermediate variable. Using the 91-Tb rate as an alternative indicator of monetary policy stance, there is no significant effect of monetary policy on price and output.

(ix) For Ethiopia, monetary shock has no impact on price and output but causes exchange depreciation. It also seems the credit innovation has a larger effect on inflation. This could indicate that the credit channel is more influential in transmitting the effects of monetary shocks to both output and inflation.

23. In the discussion that ensued the meeting commended the consultants for the excellent work and observed the following:

(i) The effectiveness of monetary policies depends on prudent fiscal policy. Thus monetary authority needs to work closely with the fiscal authorities.

(ii) If the Treasury bill are very attractive to assist Government borrowing, the central bank will not have a good policy instrument to mop up liquidity. Thus, the use of Treasury Bills as an instrument of monetary policy will be ineffective to curb inflation

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(iii) Results confirm that inflation in most COMESA Member States is not necessarily a monetary phenomenon

(iv) Pursuing tight monetary policy, in the phase of declining output is counterproductive and there is therefore, need to focus not only on achieving macroeconomic stability but also a structural transformation of the economies to achieve higher growth.

Recommendations

24. The meeting recommended the need for the following:

(i) A comprehensive policy coordination to combat inflation as well as promote growth.

(ii) Consultants to discuss the plausibility of their findings with experts in member central banks, as there could be many country specific elements

(iii) To examine credit channels in Zambia, Malawi, Swaziland and Madagascar

(iv) For investigating the assets price channel, in particular through the stock market, in Member States where stock markets exist;

(v) To use the appropriate policy instrument which is based on Islamic Banking for Sudan for proper analysis.

Foreign exchange risk Management For COMESA (Agenda item (4)

25. The Secretariat presented a paper under this agenda item. The meeting was informed that the 24th meeting of the COMESA Council of Ministers decided that the strategy for foreign exchange management for COMESA Secretariat must be discussed by the Monetary and Exchange Rates Policies Sub-Committee, and make recommendations to the COMESA Committee of Governors of Central Banks for appropriate decision.

26. The meeting was informed on the following potential effects of unexpected decline of the dollar on COMESA Secretariat’s portfolio:

a) If COMESA Secretariat holds its deposits with foreign Banks in US dollars only and if it relies heavily on purchases of products that are denominated in other foreign currencies, for example Euro, the purchasing power of its dollar deposits declines and it will cost COMESA Secretariat more than it did before to buy goods or services and this affects its net cash flows. The appreciation of the Zambia Kwacha if continues, will also expose COMESA Secretariat to high costs of all services including costs of electricity, water, communication etc. further affecting its liquidity and efficiency.

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b) The value of the salaries of its employees will significantly deteriorate in terms of appreciating currencies, either euro or Kwacha and affects their disposable income. This will, therefore, necessitate salary increments to combat the decline in real income of the employees; and

c) Fluctuations in COMESA Secretariat’s cash flow will threaten its continued viability and will absorb management time, and create a variety of operating and investment problems, including underinvestment in its important programmes.

27. The meeting was also informed that before 1997, the COMESA Unit of Account provided for in Article 74 of the COMESA Treaty was pegged to the Special Drawing Rights of the IMF (SDR). This was then changed to pegging the COMESA Dollar to the US dollar due to the fact that the US Dollar was commercially well known than SDR.

28. The meeting was further informed that Article 74 of the COMESA Treaty provides in paragraph 1 that the “unit of account of COMESA whose value shall be equal to one Special Drawing Right of the IMF or any other unit of account that may be determined by the Council from time to time on the recommendation of the Committee of the Governors of Central Banks.

29. In the discussion that ensued, the meeting observed the following:

(i) The paper did not take into account the experiences of other regional bodies in foreign exchange management;

(ii) The paper does not have time series exchange rates of major currencies and their impact on COMESA Secretariat’s foreign asset portfolio;

(iii) The paper does not indicate how the COMESA Secretariat’s portfolio of foreign assets are managed;

(iv) The proposal by the paper on the change of unit of account has implications to the budgetary contributions of member countries. This needs to be studied carefully.;

(v) The inappropriateness of the change of unit of account, at a time when the dollar exchange rate is highly depreciated. This may lead to significant losses to COMESA Secretariat; and

(vi) Change of unit of account should be based on the choice of foreign exchange management strategy, which COMESA Secretariat is not having currently. The issue of unit of account is secondary if an institution has an investment strategy.

Recommendations

30. The meeting recommended the following:

(i) The best strategy for COMESA Secretariat to hedge against exchange rate risk is to diversify its foreign currency holdings. In this regard, COMESA Secretariat needs to design and adopt an investment strategy. This strategy should have investments

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guidelines and provide benchmarks for holding of resources in various currencies;

(ii) COMESA Secretariat should report to the next meeting of the Monetary and Exchange Rates Policies Sub Committee, on how it currently manages its foreign currency holdings and the impact of the US Dollar depreciation and the Zambian Kwacha appreciation in its operations.

(iii) A study on how COMESA Secretariat should manage its foreign exchange holdings should be prepared by a well experienced investment manager.

Report of the Third Meeting on Arrangements for acceptance of Each Other’s National Currency by Egypt, Sudan and Libya (Agenda item (5)

31. Under this agenda item, the meeting was informed that the Third Meeting on Arrangements for acceptance of Each Other’s National Currency by Egypt, Sudan and Libya was held in Lusaka, Zambia, from March 17-18, 2008. The meeting reviewed the outcomes of the sensitization workshops which were held in the sub-group and the progress made on the implementation of an Action Plan which was agreed by the three countries in April 2006.

32. The meeting was also informed that the experts meeting adopted the following revised Action Plan for implementation of arrangements for acceptance of each other’s national Currencies by Egypt, Libya and Sudan:

Nature of Activity Responsibility Implementa

tion Period1. Discuss the outcomes of the stakeholders

workshopExperts from member countries of the sub-group and COMESA Secretariat

April 2008

2. COMESA Secretariat issue Operational Currency Guidelines for the countries in the Sub-group.

COMESA Secretariat

September 2008

3. Adopt the Operational guidelines for the implementation of arrangements for acceptance of each other’s national Currencies

Governors of Central Banks of the sub-group

On the sidelines of the 13th Monetary Cooperation Meetings in November 2008

33. The meeting noted the report and commended Egypt, Libya and Sudan for adopting an Action Plan for implementation of arrangements for acceptance of each other’s currency.

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Any Other Business (Agenda Item (6)

34. Under this agenda item no issues were raised.

Adoption of the Report and Closure of the meeting (Agenda Item (7)

35. The meeting adopted its report with amendments.

36. In closing the meeting the Chairperson thanked the delegates for their valuable contributions that made her job easy. She wished them a safe journey back home.

37. Mr Ibrahim Zeidy, Senior Monetary Economist also thanked the delegates for attending the meeting and wished them a safe journey back home.

List of ParticipantsListe des Participants

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Burundi

Mme Nkusi Rose Kamariza, Board Advisor, Central Bank of Burundi, P. O. Box 705, Bujumbura, Tel: +257 22218244 (Office); 25777745714 (Mobile); Fax: (257) 223128 Email: nkamariza@hotmail.com

Mr Mathias Ngendakuriyo, Cadre au Services des Etudes, Central Bank of Burundi, P. O. Box 705, Bujumbura, Tel (257) 22-225142 ; Fax : (257) 223128, Email : brb@brb.bi

D R Congo

Mr Ndidwa Nsakwa – Aban, Responsable Adjoint Monnaie & Credit ; Banque Centrale du Congo, Tel : +248 815002049 ; Email : alexndidwa2000@yahoo.fr

Kenya Mr Musa N. Kathanje, Assistant Manager, Central Bank of Kenya, P. O. Box 60000 00200, Nairobi, Tel: 254 20 286 3218, Fax: +254 20 2863236, Email: kathanjem@centralbank.go.ke

Egypt

Mr Yousry Mohamed Abdel-Rahman, Assistant Manager, Central Bank of Egypt, , 54 El Goumohoria St. Cairo, Egypt, Tel: +012 7586253, Fax: 25976021; Email: yousrycbe2@yahoo.com

Mrs Naglaa Nozahie, General Manager, Central Bank of Egypt, 54 El Goumohoria St. Cairo, Egypt, Tel: +012 7586253, Fax: 25976021; Email: mnozahie@yahoo.com

Libya

Dr Ezzeddin M Ashur, Deputy Director of Research and Statistics Department, Central Bank of Libya, P. O. 1103 Tripoli, Tel: + 218 91 374 22 86, Fax: + 218 21 4773903, Email: eashur@cbl.gov.ly

Malawi

Mr Samson Kwalingana, Economist, Reserve Bank of Malawi, P. O. Box 30063, Lilongwe 3, Tel: 265 1 770600; Fax: 265 1 770593, Email: skwalingana@rbm.mw ; samkwalingana@yahoo.com Malawi (Cont’d)

Mr Mbane Ngwira, Manager, Treasury, Reserve Bank of Malawi, P. O. Box 30063, Lilongwe, Tel: +264 1770600; Fax: +265 1 772752; Email: mngwira@rbm.mw

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Mauritius

Mrs Hurree Gobin Padma Sandhya, Chief, Statistics Division, Bank of Mauritius, Sir William Newtown St. Port Louis, Tel: 230 2023981; Fax: 208 46387; Email: phurree@bom.intnet.mu Rwanda

Mr Sekagilimana Celestin, Director, National Bank of Rwanda, P. O. Box 531, Kigali, Tel: 08306019, Fax: 572551; Email: csekagilimana@bnr.rw

Mr Christian Rwakunda, Research Analyst, National Bank of Rwanda, P. O. 531, Kigali, Tel: +250 574282; Fax: +250 572551; Email: crwakunda@hotmail.com

Sudan

Mr Abdel Rahman Mohamed, Division Chief, Central Bank of Sudan, P. O. Box 313, Khartoum, Tel: +249 9 12215807, Fax: +249 183 781341, Email: arahamanm40@hotmail.com

Mrs Fatima Mahmoud Ibrahim, Division Chief, Central Bank of Sudan, P. O. Box 313, Khartoum, Tel: +249 912253222, Fax: +249 183781341, Email: fatimaa33@hotmail.com

Swaziland

Mr Patrick Ndzinisa, Senior Economist, Central Bank of Swaziland, P. O. Box 546, Mbabane, Tel: +268 4082204, Fax: +268 4040038, Email: Patrickn@centralbank.org.sz

Uganda

Dr Abuka Charles Augustine, Deputy Director, Research Department, Bank of Uganda, 37/43 Kampala Road, P. O. Box 7120, Kampala, Tel: +256 414 232547, Fax: +256 414 254760, Email: cabuka@bou.or.ug

Zambia

Mr Wilson Kapembwa Mazimba, Economist, Bank of Zambia, P. O. Box 30080, Lusaka, Tel: 228888, Fax: 221722; Email: wmazimba@boz.zm

Consultants

Dr Chistopher Kiptoo, Manager, Research, Central Bank of Kenya, P. O. Box 60000 00200, Nairobi, Tel: 254 20 286 3218, Fax: +254 20 2863236, Email: kiptoock@cetralbank.go.ke

CS/TCM/MERP/V/5Page 19

Dr Noah Mutoti, Senior Economist, Bank of Zambia, P. O. Box 30080, Lusaka, Tel: 228888 Mobile: 260 977 892424, Fax: 221722, Email: nmutoti1@yahoo.com

COMESA Secretariat, P.O. Box 30051, Lusaka, Zambia, Tel: +260 211 229726, Fax: +260 211 225107, E-mail: secgen@comesa.int

Mr P Hurry, Officer in Charge, Trade, Customs and Monetary Affairs, Email: phurry@comesa.int Mr Ibrahim Zeidy, Senior Monetary Economist, Email: izeidy@comesa.int Ms Rosemary Musiwa, Administrative Assistant, rmusiwa@comesa.int Mrs Nengela Nalumino, Secretary, Email: nnalumino@comesa.int

Interpreters

Mr Paul Kaunda, Interpreter, P. O. Box 320228, Woodlands, Tel: 0977154715, 0978531481, Fax: +260 211 265831, Email: pakaunda@yahoo.co.uk

Mr Kalyango Kafula, Interpreter, P. O. Box 37014 Naboye, Kafue, Tel: 0211 312559 Cell: 0966 725920; Fax: 0211 229149; Email: kake124@yahoo.com

Translator

Mr Chiluka Valentine Lejima, chihiluka@yahoo.fr