Business | Economy
GCC 'needs dollar peg to issue common currency'
Members of the Gulf Cooperation Council (GCC) continuing to peg their currencies to the dollar is an important requirement for issuing a common currency by 2010, a senior official told Gulf News yesterday.
- By Ahmed A. Elewa, Senior Reporter
- Published: 01:00 April 11, 2008
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Abu Dhabi: Members of the Gulf Cooperation Council (GCC) continuing to peg their currencies to the dollar is an important requirement for issuing a common currency by 2010, a senior official told Gulf News yesterday.
"The peg allows us to generate what is termed as a snake pattern for the member countries' exchange rates movement, a concept that was deployed in a different manner by the Europeans before issuing their currency, and this is necessary," Mohammad Obaid Al Mazroui, GCC assistant secretary-general for economic affairs said.
Inflation
"Oman's departure [from the monetary union] is not a stumbling block, and the dollar still represents the bulkiest composite in Kuwait's currency basket. This is apparent from the imported inflation there," said Al Mazroui.
"The GCC's efforts to contain inflation include delaying the introduction of the value-added tax. The studies are in the final stages, but the leaders do not find the timing suitable as it will increase the burden on consumers," Al Mazroui said.
"But we also have to consider that the weakening dollar, which drags the GCC currencies down, is only one aspect of the inflation problem, which is a natural phenomenon in rapidly growing economies," he added, referring to soaring commodities prices, especially oil and poor agricultural harvests as having a stronger impact in this respect.
The success of the GCC in achieving its targets within the set timeframe will help businesses to benefit from the economic integration, where the council is actively engaged in many free trade agreement (FTA) negotiations, including with the European Union, China, Australia, Japan, Singapore, India, Pakistan, Turkey, and members of the North American Free Trade Agreement.
"Many of these negotiations are quite active, while the FTA with Europe is in its final stages. The important point here is that the GCC industries will be well protected as the opening up with these countries will also be associated with the introduction of taxes," he said.
Throughout its history, the GCC has achieved a number of landmark accomplishments, including the FTA in 1982, the Customs Union in 2003, and the Common Market in 2008.
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