Expert Exchange on Fiscal Policy in a Monetary Union – A Great Learning Experience!

From Sunday 2nd to Friday 7th of September, GIZ’s “Support to the EAC Integration Process” Programme conducted an expert exchange on “Fiscal Policy in a Monetary Union” for delegates from the Ministries of Finance and Revenue Authorities of the Member States of the East African Community (EAC) as well as the EAC Secretariat.

This expert exchange is part of a long-term systematic capacity building process for policy makers to support economic integration in the EAC.

“The expert exchange to the EU was a great learning experience for us as we prepare to introduce a single currency in the EAC. A key lesson was the creation of new institutions necessary to ensure better compliance with common fiscal rules and a stronger coordination of policies.,” said Dr Albert Musisi, Director at the Ugandan Ministry of Finance, Planning & Economic Development and Head of the EAC Delegation.

The delegation received an institutional overview on the role and tasks of the European Central Bank (ECB) and on the Eurosystem at the ECB’s headquarters in Frankfurt On the same day, this information was consolidated and enriched during a visit at the Deutsche Bundesbank, where the participants were introduced to the national perspective and discussed the importance of central bank independence.

In Berlin, the group met the German Federal Ministry of Economic Affairs as well as the German Federal Ministry of Finance to focus on the design of fiscal policies within the EU. Both Ministries are jointly engaged in the European Semester, a coordination cycle for fiscal, economic, and employment policy to increase the fiscal and economic stability of the union together with the European Commission and the EU member states. Discussions at the Ministry of Finance focused on the paramount importance of a sound fiscal policy for the EU. The delegates had a unique opportunity to discuss lessons learned from the 2008 financial crisis and the Eurozone crisis of 2009/10 with Dr. Wolfgang Merz. This crisis was at the origin of the creation of the European Banking Union and many other instruments designed to preserve the stability of the Eurozone.

During a mid-term workshop, GIZ tax expert Tobias Fleckenstein talked about the harmonisation of domestic taxes — currently also an important subject for the fiscal experts of the EAC. Participants discussed various fiscal policy instruments and the significance of political commitment by the member states for the functioning of the monetary union.

In Brussels, the group was received at the Representation of Land of Brandenburg to the EU for a presentation and discussion on how interests of European regions are coordinated and safeguarded in proceedings before the EU institutions. The last day dealt with the fiscal policy coordination in the EU. Presentations and discussions at the EU Commission’s Directorate-General for Economic and Financial Affairs (DG ECFIN) and the European Fiscal Board (EFB) provided the delegates with first-hand insights on a wide range of implemented fiscal policy measures as well as further opportunities to enhance and strengthen convergence in a monetary union. A follow-up discussion at the European Fiscal Board highlighted the advantages of establishing an independent advisory body on fiscal policies.