Business | Economy
Single currency launch delayed
Gulf Arab central bankers agreed to set up the nucleus of a joint central bank next year in a major step forward for monetary union and vowed to overcome any remaining obstacles even as inflation throws the project into doubt.
- Reuters
- Published: 18:30 June 9, 2008
Doha: Gulf Arab central bankers agreed to create the nucleus of a joint central bank next year in a major step forward for monetary union but signalled that a new common currency would not be in circulation by an agreed 2010 target.
Confronting record-high inflation that threatens to derail the project, central bank governors from the six-member Gulf Cooperation Council (GCC) on Monday laid out a roadmap leading toward common monetary institutions before 2010.
"This is a very big step forward," said Salim Al Gudhea, head of the monetary union unit at the GCC Secretariat-General.
The timetable calls for the central bank draft proposal to be approved by finance ministers at a meeting in September and for the region's rulers to sign a final deal in November, Gudhea said.
"This is the first time that the draft is going up in the hierarchy rather than back to the technical committee," he said.
Each Gulf state would have to ratify the deal before the monetary council begins operations. The council would not have monetary policy decision-making power but would eventually be converted into the Gulf central bank.
A draft for setting up a new monetary council, which would serve as a forerunner to a common central bank, was also approved yesterday.
Founding a monetary council similar to what the European Monetary Institute did as a forerunner to the European Central Bank will help anchor the project, Gudhea said.
But Qatar's central bank governor, Shaikh Abdullah Bin Saud Al Thani, left open the date at which the common currency - which has yet to be named - would actually come in circulation and replace member states' coins and notes.
"2010 will be the date for the creation of a monetary council or a monetary authority for the Gulf Cooperation Council countries", Shaikh Abdullah said after an extraordinary meeting of the central bank chiefs in Doha. "We are not talking about the currency," he told Reuters.
Inflation has been hitting record peaks across the world's biggest oil-exporting region, where most states peg their currencies to the ailing US dollar, driving up import costs.
"They have been very successful in showing there is greater unity in forging ahead with this," said Monica Malik, an economist at EFG-Hermes investment bank. "But they're still at the very early stages of completing anything concrete."
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