Climate change could derail EAC economies, central bank bosses warn

Central Bank of Kenya Governor Kamau Thugge. [Boniface Okendo, Standard]

Central banks from the East African Community (EAC) bloc are raising the alarm on climate change and its impact on the regional economies.

They see it as a major threat to the region’s economies and are now calling for a stronger response from respective governments. Led by Kenya’s Central Bank (CBK) Governor Kamau Thugge, the banking regulators warned in a statement that the negative impacts of climate change are already evident.

They emphasised that inaction would only exacerbate the damage, harming people’s well-being and driving up future costs.

The governors issued the dire warning in a communique seen by The Standard after a special meeting of the East African Community (EAC) Monetary Affairs Committee (MAC) held last week. While the region’s economic outlook appears promising, Kenya and other EAC countries remain vulnerable to climate change alongside other global challenges, the central bankers warned.

The EAC Monetary Affairs Committee comprises eight regional central bankers from the eight member states and meets every year to evaluate the implementation of the EAC bloc’s joint economic projects and assess emerging systemic challenges to regional economies. Members include Kenya, South Sudan, Burundi, Rwanda, Tanzania, Uganda, Democratic Republic of the Congo and Somalia.

The current chairperson of the special committee is Dr James Alic Garang, the Governor of the Bank of South Sudan. “The region still faces unfavourable global financial conditions, negative spill-overs from geopolitical conflicts and the impact of climate change that continue to weigh on the economic performance of East African countries,” said the committee in the communique.

The communique is signed by CBK Governor Kamau Thugge; Dr James Alic Garang of the Bank of South Sudan; Édouard Normand Bigendako, governor of the Central Bank of Burundi; Dr Thierry Mihigo Kalisa of the National Bank of Rwanda; Emmanuel Mpawe Tutuba, the Central Bank governor of the Bank of Tanzania and Dr Adam Mugume of the Bank of Uganda.

“The committee noted that partner states’ central banks have made significant strides towards implementing price-based monetary policy frameworks, harmonising regional macroeconomic and financial statistics to support policy formulation, implementing EAC capital markets infrastructure, harmonising principles and rules for the regulation and supervision of the region’s financial system, enhancing risk and crisis management frameworks to ensure the stability of the region’s financial systems, adopting climate risk awareness and promoting the use of the regional cross border payments system (EAPS),” said the committee.

Torrential rains have caused devastating floods in Kenya, leaving more than 200 people dead, thousands displaced and nearly 2,000 schools destroyed. All remaining schools have been shut down until further notice. The recent heavy rains have caused severe flooding and landslides across Kenya and Tanzania.

The torrential rains, amplified by the El Nino weather pattern, have battered the two countries for weeks, blocking and destroying roads, sweeping away homes and disrupting education, hospitality, manufacturing and transport sectors. More than 195,000 people have been displaced in Kenya alone.

The rains have been ravaging Kenya since March during some of the most catastrophic weather events in the country for years. Cyclone Hidaya was expected to hit Kenya and neighbouring Tanzania late on Friday, which could further worsen the flooding. This comes amid recent heavy rainfall across East Africa.

The flooding has wreaked havoc in Kenya, causing death and destruction.

Climate events such as El Nino – the warming of the surface water of the Pacific Ocean, which causes heavy rainfall in some parts of the world – have been linked to the increase in rain by experts.

In anticipation of Kenya’s first-ever cyclone, President William Ruto ordered mandatory evacuations for residents close to 178 dams and water reservoirs in 33 counties. Search and rescue operations remain ongoing across the country.

On Tuesday last week, President Ruto ordered the military to join disaster response efforts.

He previously referred to Kenyans affected by the flooding as “victims of climate change” after the phenomenon exacerbated already-strong weather patterns. During his national address to the nation on Friday, President Ruto said he had directed the Ministry of Education to postpone the reopening of schools for their second term until further notice.

Besides the schools destroyed since March, many other schools are being used to shelter those who the floods have displaced.