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Gulf Arab Single Currency May Be Dollar-Pegged, Samba Says
By Camilla Hall
Oct. 14 (Bloomberg) -- Four Gulf Arab states that plan to establish a joint central bank may initially peg their single currency to the dollar, said Howard Handy, chief economist at Samba Financial Group, Saudi Arabia’s second-largest bank.
Before the introduction of the unified currency “we do not expect any changes to GCC exchange rate regimes, including in those countries currently opted out of monetary union,” Handy said. “In the first instance, we also expect that the single currency will retain the dollar peg.”
The Gulf Cooperation Council in 2001 agreed to form an EU- style monetary union. Oman pulled out in 2007 and the United Arab Emirates left in May. A single currency would enable Gulf states to pursue a monetary policy more independent of the U.S., as all except for Kuwait peg their currencies to the dollar. It would also help support a fully integrated economic zone.
Saudi Arabia “hasn’t lost hope” that Oman and the United Arab Emirates will re-join the planned monetary union, Saudi central bank governor Muhammad al-Jasser said on Sept. 1. Saudi Arabia, the largest Arab economy, Kuwait, Qatar and Bahrain are still part of the project.
“The January 2010 target for a single currency is challenging, and more time will probably be needed to finalize the operational framework of the central bank, harmonize statistics, and improve regional payment systems,” Handy said.
“Currency union should be seen as an evolutionary process rather than an abrupt break with the past.”
Unified GCC currency -
14th October 2009
