The effects of escalating conflicts in the Middle East and Eastern Europe have taken center stage at the 29th Ordinary Meeting of the Monetary Affairs Committee of the East African Community (EAC), which concluded in Uganda this week.
All seven central bank governors from the region (with the exception of the Democratic Republic of Congo) voiced deep concern over how these geopolitical tensions are exporting inflation, weakening local currencies, and threatening hard-won economic growth across the bloc.
A key focus of the discussions was the reversal in current account trends since the outbreak of conflict in the Middle East, a region that has become a top trading partner and major source of foreign exchange for EAC countries through exports of minerals and agricultural products, as well as critical labor remittances.
Bank of Uganda Governor Michael Atingi-Ego stressed the importance of prudent monetary policy in navigating the widening current account deficits, a situation where a country spends more on imports and transfers than it earns from exports. This trend, he warned, is putting pressure on foreign exchange reserves.
“We need to build strong financial buffers using avenues like the domestic purchase of gold,” Atingi-Ego advised, calling for enhanced early warning systems to anticipate and mitigate these external shocks.
Despite the global headwinds, the region’s economic performance showed resilience, with the average growth rate estimated at 5.6% in 2026 higher than the sub-Saharan African average. Intra-regional trade also saw significant growth, exceeding 30%.
However, Annette Ssemuwemba Mutaawe, EAC Deputy Secretary General in Charge of Customs, Trade and Monetary Affairs, pointed out a persistent weakness. “Trade among EAC countries has not grown for the last thirteen years due to persistent trade barriers, exposing the region to external shocks,” she said. She called for quick and strong interventions to maintain the region’s resilience amidst global threats.
Central bank governors shared their national perspectives and the measures being taken to counter these pressures:
- Kenya: Governor Kamau Thugge projected a widening current account deficit as exports and remittances are expected to be affected. He noted that inflation, which had been within the EAC target below 5%, rose above 6% in June due to geopolitical developments affecting prices of essential commodities.
- Tanzania: Governor Emmanuel Mpawe Tutuba revealed that the country had enjoyed a positive current account until the 2025/2026 fiscal year, but the war has reversed that trend. Like Uganda, Tanzania has also opted for domestic gold purchases to boost its reserve buffers, now holding gold reserves worth about $6 billion (excluding ‘non-monetary’ stocks, which would raise the total reserve value to $8 billion).
- Rwanda: While the National Bank of Rwanda reported the fastest-growing economy in the region at 9.2% last year, the country is also facing the highest inflation rate, exceeding 13%, driven by the high cost of essential imports. Chief Economist Thierry Kalisa noted that the changing economic environment due to geopolitical developments, climate change, and other shocks are making the monetary policy environment more complex.
Kalisa called on central banks and governments to commit more resources to finding solutions that can mitigate the effects of global shocks, which are likely to become more frequent.
The discussions at the meeting underscored a collective determination to build a more resilient regional economy, capable of withstanding the turbulent global landscape. The EAC central banks are now exploring coordinated strategies, including strengthening financial buffers, harmonizing regulatory frameworks, and aggressively tackling non-tariff barriers to boost intra-regional trade as a hedge against external shocks.
