Gulf states extend single currency deadline

Manama: The 2010 deadline for a Gulf Arab single currency will be extended and a new timetable set, senior Gulf officials said yesterday, in the first official recognition that monetary union plans would be delayed.

Five Gulf Arab states - Saudi Arabia, the UAE, Kuwait, Bahrain and Qatar - have been working for years towards launching a single currency in 2010, a deadline that analysts and even policymakers had long said was untenable.

"The physical currency, it will not be in 2010," Naser Al Kaud, deputy assistant secretary-general of the GCC told reporters. "The monetary council will be established and one of its tasks will be to set the new timetable for the introduction of the physical currency."

While the 2010 deadline would be extended to a date to be determined by the monetary council, Gulf states would likely decide on the name of the currency and the rate at which each Gulf currency would be converted by 2010, Kaud said.

Gulf states have until December to ratify a monetary union agreement and the charter governing the monetary council - both of which were approved by Gulf leaders at a summit in December.

The monetary council is meant to be a precursor to a future regional central bank but its creation has been stuck over thorny political questions - where the joint body will be based and how much independence it will have.

Oman dropped out of monetary union plans in 2006 and Kuwait dropped its dollar peg in 2007, throwing convergence efforts into disarray in an oil-exporting region where currencies have long been pegged to the US dollar. Analysts said it was now important for Gulf Arab states to set a new date for the common currency launch to avoid creating more uncertainty.

"It's about time. Having said they are not going to meet the deadline they should also come out and say when they will meet it - otherwise it will just create more uncertainty," said John Sfakianakis, chief economist at HSBC's Saudi affiliate SABB.

"It's more of a political than a technical decision at this stage. They could do it in two years. With the financial crisis they are seeing the importance of monetary union; now they see clearly that they are not isolated from what is happening."