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Gulf central bankers to focus on currency union

Gulf Arab central bankers meet on Monday for the second time in less than three months to pick up the pace of monetary union as they resist pressure to drop their dollar pegs amid soaring inflation.

  • Reuters
  • Published: 00:00 June 7, 2008
  • Gulf News

Dubai: Gulf Arab central bankers meet on Monday for the second time in less than three months to pick up the pace of monetary union as they resist pressure to drop their dollar pegs amid soaring inflation.

The six-member Gulf Cooperation Council (GCC) will try to flesh out technical issues in their extraordinary general meeting to come up with a final document on monetary union to be presented to the region's leaders by year-end.

"The nature of the meeting is very technical and detailed and the focus will be on establishing the institutional and legal framework for the monetary union," said a GCC secretariat official, who declined to be identified.

Since last year, the dollar has plunged against the euro, the US Federal Reserve has slashed interest rates six times, and inflation in Qatar and Saudi Arabia have hit record highs.

Policy

The need to maintain dollar pegs has forced Gulf countries to cut interest rates in tandem with the Federal Reserve even though their economies are booming, their main export, oil, is priced in dollars and inflation is spiralling.

At their regular meeting in April, the governors discussed removing obstacles to longstanding single currency plans in an effort to prevent unilateral revaluation as pressure mounts.

Of the six countries, Oman has said it would not join the union and Kuwait dropped its peg in 2007.

"This is a continuation of our last meeting. We will follow up on the progress of the technical committees," Bahrain's central bank governor Rashid Al Maraj said last week.

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