Gulf states to decide on monetary union this month

Washington: The Gulf Cooperation Council (GCC) will decide on a new target deadline for the monetary union by the end of this month, according to senior GCC officials.

"GCC finance ministers and central bank governors will meet immediately after the International Monetary Fund's annual meeting for talks. We will discuss issues including the possibility of pushing the timetable further down the road," Saudi finance minister Ebrahim Al Assaf told the media on the sidelines of IMF-World Bank meetings in Washington.

Following the Gulf central bank governors' meeting in Saudi Arabia in September, the Saudi Central Bank Governor Hamad Saud Al Sayyari said a monetary union among the Gulf states will be difficult to achieve by the 2010 deadline and the central banks have agreed to deal with the inflation problem separately.

Renewed resolve

Earlier this month, UAE central bank governor Sultan Nasser Al Suwaidi said the target to achieve monetary union by 2010 could be pushed beyond 2015 because the member countries have not yet achieved the dynamics of a common currency market.

Cracks in the GCC monetary union plan began to appear from the beginning of this year. The 2010 target came under a cloud last May when the Central Bank of Oman admitted that the country was not ready for the union. Later Kuwait withdrew its currency's peg to the dollar inflicting a serious blow to monetary convergence criteria.

Al Assaf's comments in Washington are seen as a renewed resolve to achieve monetary union even at the cost of higher inflation in the member countries. With their currencies pegged to the dollar, GCC states face a monetary policy dilemma when a falling dollar and interest rates aggravate their domestic inflation.