Business | Banking
GCC bankers under pressure over currency
Central bank Governors hope to agree on convergence rates by end of the year.
- Reuters
- Published: 23:01 April 3, 2009
Dubai: Gulf Arab central bankers will face pressure at a meeting this week to specify an alternative timetable for rolling out a single currency as markets become increasingly sceptical about the project's viability.
The Gulf Cooperation Council (GCC) last month gave its first official acknowledgement that issuing common notes and coins will take longer than the 2010 target agreed on eight years ago.
However, as regional policymakers focus on the more pressing concern of shoring up their economies and banks against the global financial crisis, some analysts wonder if the project could be left to languish for many more years.
Decisions on the location of the Gulf central bank and when it will start operating remain undecided as central bank governors from Saudi Arabia and five other oil exporters gather for a bi-annual meeting from April 6 to 7 in Muscat.
"The comments that we saw last month seemed to confirm that it is being delayed. We're likely to see that formally stated at the summit," said Simon Williams, regional economist at HSBC.
"If at the end of summit we don't see some evidence of progress, the market is likely to conclude that the project has been allowed to lapse, not merely been delayed."
The monetary union plan, part of a wider project to create a regional common market including a customs union, has faced setbacks after Oman decided not to join and Kuwait severed its dinar's peg to the dollar.
In 2001, the GCC - a political and economic bloc also including the UAE, Qatar and Bahrain - had agreed to keep pegs intact until a single currency comes into force.
In the past year, Gulf central bank governors have insisted that monetary union is back at the top of their agenda.
The region's leaders signed key monetary union accords in December and governors said they hoped to name the currency and decide on the convergence rate by the end of the year.
Should the Gulf States fast track the economic integration? Do you think the single currency will be beneficial? How do you see this affecting your business?
Your comments
The GCC should move on faster pace keeping in view the financial crises prevailing all over the world and are need of the hour to review their financial system to protect them. The better regulated financial system is key for the financial stability and economic development. The common currency may benefit the participating countries on conversion and a solid single currency will have better position in the world financial market.
Mohammad Irfan
Al-Ain,UAE
Posted: April 04, 2009, 08:30
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