Stability of the financial sector in the EAC

The East African Community (EAC) is undergoing a significant transformation with the inclusion of new members like Somalia and the Democratic Republic of Congo (DRC). The expansion has raised questions about regional financial integration, macroeconomic resilience, and sectoral performance. To delve deeper into these issues, Declan Galvin, Managing Director at Exigent Risk Advisory, a seasoned expert in frontier markets, recently shared his insights in an exclusive interview with CNBC Africa's Tabitha Muthoni. Galvin highlighted the tremendous opportunities presented by Somalia and DRC joining the EAC. While some may have reservations about the value these countries bring due to logistical, language, and economic differences, Galvin emphasized the long-term benefits. He noted the potential for agricultural, mining, and trade partnerships that could fuel economic growth and progress within the region. When discussing the challenges and opportunities for regional financial stability, Galvin acknowledged the risks introduced by the new members but suggested that these could be mitigated over time. He expressed optimism about the upside potential for non-financial services and highlighted the need for smoothing out structural issues within the EAC. The interview also touched on the performance of key sectors like agriculture and services, which have been driving resilience in the region. Galvin emphasized the importance of diversification in agriculture to mitigate climate change risks and highlighted the commercial opportunities in Eastern DRC for East African businesses. In terms of the private sector's response, Galvin noted that each country in the EAC must address its unique challenges to attract investment and enhance financial stability. He underscored the importance of developing market-fit banking products and managing foreign direct investment effectively to sustain long-term growth. As the conversation shifted to global dynamics, Galvin discussed the impact of inflation and geopolitical tensions on the EAC financial markets. He emphasized the need for East Africa to position itself as a less risky option for investors amid global uncertainty, which could drive capital inflows and enhance institutional stability. Regarding investor sentiment and capital inflows, Galvin pointed out that GDP growth alone is not sufficient to attract investment. He stressed the importance of promoting business opportunities, easing the process of doing business, and showcasing economic potential to enhance investor confidence. In conclusion, Galvin highlighted the leadership cohesion within the EAC as crucial for achieving macroeconomic stability and promoting business growth. While leadership may not always be in the spotlight, he emphasized the need for greater efforts to promote EAC's business potential and attract FDI systematically. The discussions with Declan Galvin shed light on the evolving landscape of the EAC and the implications for financial stability and sectoral performance. As the region navigates new opportunities and challenges, leadership, resilience, and strategic partnerships will be key to driving sustainable economic growth within the East African Community.