Dubai: Four Gulf Cooperation Council (GCC) countries will announce the introduction of a common currency by the end of December, a Bahraini daily reported on Sunday.
The common currency to be announced by Bahrain, Kuwait, Qatar and Saudi Arabia will be pegged to the dollar, a source told Akhbar Al Khaleej.
“The decision to peg the Gulf currency to the dollar is political and is not related to the economy,” the source said.
“From an economic point of view, it would have been better to peg the new currency to a basket of currencies because the volume of trade of the Gulf states with the countries of the European Union is much larger than that of their commerce with the United States. Gulf exports of oil to the European Union are estimated to constitute about 70 per cent of European imports,” the source said.
The daily did not identify the sources, but said it was close to Gulf decision-making circles.
Oman and the UAE, the other two members of the six-country Gulf council set up in 1981, are not likely to join the common currency in the near future, the source added, without divulging the reasons for the same.
“I do not see any need for a common Gulf currency if it is not sovereign. Even though the GCC states have huge financial reserves, their currencies are not listed on the world’s reserve currency list because they are not producing states,” the source said.
The GCC countries have been discussing a currency union similar to the Eurozone for more than 15 years.
Several economists in the Gulf have been calling for dropping the GCC countries’ long-entrenched peg to the dollar and consider moving to a more flexible exchange rate that will help them better face highly possible inflation risks and economic crises.
In September, an official of the European Central Bank (ECB) said that the GCC should not introduce a common currency before its members have a clear common objective.
Yves Mersch, an executive board member of the ECB, reportedly said at a global financial summit that no union of states would be ready for a common currency if there was no political consensus.