EALA’s Bold Move to Promote Local Currencies: A Step Towards Greater Economic Independence and Intra-regional Trade in East Africa, De-Dollarisation Begins.

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On June 30, 2021, the East African Legislative Assembly (EALA) made a significant decision that could impact local and international trade across the East African Community (EAC) partner states. The lawmakers approved a motion to allow the usage of local currencies as legal tender instead of the US dollars. This resolution comes after the efforts of Kenyan legislators, David Ole Sankok and George Odongo, who moved and seconded the motion respectively.

By promoting the use of local currencies as legal tender, the lawmakers aim to boost economic activity, encourage intra-regional trade, and reduce reliance on foreign currencies. But why did the EALA pass this resolution, and what does it mean for the people of East Africa and the global trade market? Let’s take a deeper look.

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EALA’s Resolution to Promote Local Currencies’ Usage: A Game-Changer for East Africa and Global Trade.

Why did EALA pass this resolution?

1. To promote economic stability and growth

One of the major reasons for the resolution was to promote economic stability and growth across the EAC partner states. By promoting the use of local currencies as legal tender, the lawmakers aim to boost economic activity, encourage intra-regional trade, and reduce reliance on foreign currencies. This could lead to increased investment, job creation, and overall economic growth across the region.

2. To reduce the impact of foreign exchange fluctuations

The resolution also aims to reduce the impact of foreign exchange fluctuations on local businesses and the general population. Many East African countries rely heavily on the US dollar for international transactions, which exposes them to the volatility of the currency’s exchange rates. By promoting local currencies’ usage, the EAC partner states can hedge against these fluctuations and better control their economies’ stability.

3. To retain the value of local currencies

Another reason for the resolution was to retain the value of local currencies. With the widespread use of foreign currencies like the US dollar, local currencies’ demand decreases, leading to a decline in their value. By promoting local currencies’ circulation, the EAC partner states aim to prevent this decline and ensure their currencies’ stability and growth.

What does this decision mean for the people of East Africa?

1. Increased economic activity and local trade

The EALA’s decision could lead to increased economic activity and local trade. By promoting local currencies’ usage, the EAC partner states can reduce their reliance on foreign currencies and encourage intra-regional trade. This could lead to increased investment, job creation, and overall economic growth across the region.

2. Improved control over the economy

With the ability to halt the usage of US dollars in both local and international transactions, the EAC partner states can exercise better control over their economies’ stability. They can hedge against the impact of foreign exchange fluctuations and exert greater influence on their economic growth and development.

3. Protection of local currencies’ value

By promoting local currencies’ usage, the EAC partner states can protect the value of their currencies against foreign currencies’ volatility. This would lead to a more stable and predictable economic environment that businesses and individuals can rely on.

How will the resolution impact the global trade market?

1. Potential decline in the US dollar’s value

The EALA’s decision could lead to a potential decline in the US dollar’s value. With the reduced demand for the currency across the EAC partner states, the exchange rates for the USD could take a hit, leading to a decline in its value.

2. Promotion of other currencies

The EALA’s decision could also promote other currencies like the Euro and Chinese Yuan in the region. With reduced demand for the USD, businesses and individuals might turn to alternative currencies for their international transactions, leading to increased usage and demand for other currencies.

3. Impact on US trade relations

The decision might also impact US trade relations with the EAC partner states. With reduced demand for the USD, the US might lose some influence over the EAC economies and trade activity. However, it remains to be seen how this would play out in the long run and what steps the US might take in response.

FAQs

1. What prompted EALA to pass this resolution?

The EALA passed the resolution to promote economic stability and growth, reduce the impact of foreign exchange fluctuations on local economies, and retain local currencies’ value.

2. Will this decision lead to reduced trade with the US?

The decision might reduce trade activity with the US, but it’s still too early to tell what the long-term impact would be.

3. Will businesses and individuals face any difficulties switching to local currencies?

There might be some logistical difficulties in the short term, but the long-term benefits of promoting local currencies’ usage outweigh the challenges.

4. Will this decision promote intra-regional trade?

Yes, by promoting local currencies’ usage, the EAC partner states can encourage intra-regional trade, leading to increased economic activity and growth.

5. What impact will this decision have on the value of other currencies?

The resolution could lead to an increase in demand for other currencies like the Euro and Chinese Yuan, leading to potential growth in their value.

6. Can other regional organizations learn from this decision?

Yes, the EAC’s decision could set an example for other regional organizations looking to promote economic stability and growth across their member states.

In conclusion, the EALA’s decision to promote local currencies’ usage instead of the US dollar has significant implications for East Africa and the global trade market. This resolution could lead to increased economic activity, local trade, and stability in the region. However, it remains to be seen how the resolution would impact US trade relations with the EAC partner states and the global trade market in the long run. Nonetheless, the decision could set an example for other regional organizations looking to promote economic stability and growth in their member states.

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