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Decision on Gulf central bank was political, says Suwaidi
The decision of choosing the Gulf Central Bank was political and disregarded the UAE's competitive qualities.
- WAM
- Published: 23:39 May 22, 2009
Dubai: The decision of choosing the Gulf Central Bank was political and disregarded the UAE's competitive qualities.
In an interview with Dubai TV on its the Gulf Economy programme aired on Friday evening, Sultan Bin Nasser Al Suwaidi, the UAE's Central Bank Governor, added that the decision disregarded the fact that major banks from all over the world have branches in the country and that 50 per cent of international money transfers in the Gulf region took place in the UAE.
Al Suwaidi said he was surprised when Riyadh was chosen as the location for the Gulf Central Bank, because the UAE was the first to make its request for hoisting the bank.
He also said that the location issue was not the only reason behind the UAE pulling out of the Gulf Monitory Union. There were other reservations stated by the UAE on some other items in the Guld Monetary Union which were also overlooked.
Al Suwaidi clarified that the UAE had fsome undamental reservations and other minor ones regarding the union, such as marginalising the currency agreement cased on the International Monetary Fund, Special Drawing Rights, and its being devoid of an appropriate mechanism which will allow it a sequenced entrance in the GCC's currency accounts for a reasonable time duration required to try out monetary policies.
This time span would have been essential for evaluating issues and their affect on the economies of GCC countries.
The other UAE reservation entailed the role of the Gulf Monetary Council which was limited to conducting studies while it should have had a role in the monetary policy and other practical aspects, added Al Suwaidi.
He also said that the UAE had additional remarks concerning the Gulf Monetary Union as a result of the absence of a unified inflation index, and the condition of covering the currency reserve from imports.
He said that this condition is overlooked and did not take into consideration the differences between imports to be exported and imports for local consumption.
Al Suwaidi said that 70 per cent of the UAE's imports are directed to re-export, making it the second re-export center in the world.
He also reaffirmed that pulling out of the Gulf Monetary Union does not mean the UAE will change its monetary policies. The UAE's policy will remain open and that the official discount price will remain low while the Dirham will remain pegged to the US Dollar, he said.
Al Suwaidi also said that that the UAE Central Bank's Deposit Certificates which hit Dh215 billion at the height of speculation have receded to Dh48 billion, which means speculation money is no longer in the UAE. "This is a source of relief to us," he added.
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