Bahrain doubts currency union date

Manama: Bahrain's crown prince cast doubt on a 2010 deadline for monetary union in the world's top oil exporting region and said his country and five other Gulf Arab states were still haggling over some convergence criteria.

Crown prince Shaikh Salman Bin Hamad Al Khalifa's remarks in an interview with the McKinsey Quarterly business journal were confirmed yesterday by a spokeswoman for Bahrain's Economic Development Board, which is chaired by the prince.

"I have my doubts that the 2010 target will be met because of a number of technical issues that need negotiation," Shaikh Salman said. "Among these issues are agreeing to the convergence criteria for inflation, public debt, and the setting of interest rates."

Bahrain, UAE, Saudi Arabia, Kuwait, Qatar and Oman are working towards monetary union, although Oman plunged the project into crisis in December, saying it would not join in 2010.

Omani officials have said criteria, including capping budget deficits at three per cent of gross domestic product, could constrain Oman as it seeks to diversify its economy away from dwindling oil revenue.

Last week, Bahrain's central bank governor Rashid Al Maraj said Gulf Arab states were sticking to their plans for a single currency, but called the 2010 deadline "a challenge".

The UAE has said the Gulf was reviewing the entire currency project and hoped to agree on a simpler form of monetary union.

March meeting

The speculation in currency markets reached fever pitch when UAE Central Bank chief Sultan Nasser Al Suwaidi said last month Gulf states could decide at a March meeting in Riyadh, whether to keep or change their exchange rate regime.

Oman and Bahrain, the smallest of the six economies, have ruled out any changes to their exchange rate policy as has Saudi Arabia.