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Monetary union draft could get bankers' nod

Central bank governors of five Gulf states will probably approve a new draft accord for monetary union at a meeting in Jeddah, Saudi Arabia, this week, the latest step toward a single currency for the region.

  • Bloomberg
  • Published: 00:01 September 15, 2008
  • Gulf News

Dubai: Central bank governors of five Gulf states will probably approve a new draft accord for monetary union at a meeting in Jeddah, Saudi Arabia, this week, the latest step toward a single currency for the region.

Gulf finance ministers will discuss the draft at the same meeting, scheduled for September 15 and 16. Heads of state may give final approval at a meeting in Muscat, Oman, before the end of the year, said Salim Al Gudhea, head of the monetary union unit at the Gulf Cooperation Council (GCC) Secretariat General, in an interview.

Progress toward a single currency eases pressure on Saudi Arabia, the UAE, Qatar, Kuwait and Bahrain to revalue their currencies or drop pegs to the dollar after inflation accelerated. The five agreed in 2001 to form a European Union-style monetary union by 2010 to boost regional trade.

Central bankers "are expected to pass the draft and that is a positive step", said Monica Malik, Dubai-based chief economist at EFG-Hermes Holding, Egypt's largest investment bank. This week is "the easy part. The stages after that will be tricky."

Contracts to buy dirhams in a year have fallen 3.1 per cent since a March 18 high. Saudi riyal forwards dropped 2.2 per cent in the same period.

The five states are pushing ahead with monetary union after Oman pulled out last year.

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