Single currency could float
The GCC single currency will be pegged to the dollar when it is launched in 2010 but might be allowed to free-float within five years, Sultan bin Nasser al-Suwaidi, governor of the Central Bank of the UAE, said following a meeting of GCC central bank governors on 30 October in Abu Dhabi. Currently, all GCC currencies are pegged to the dollar, which limits central banks' control over monetary policy.
'It's a self-confident statement to stand on your own,' says Eckhart Woertz, programme manager, economics, at Dubai-based Gulf Research Centre. '[Unpegging from the dollar] makes sense as the dollar is weak and will remain so. There is a lot of imported inflation due to the peg and it makes sense from a trade aspect as one-third of imports [to the GCC] come from Europe and a third from Asia and only 10 per cent from the US.'
The location of a new GCC central bank is also under discussion. Both the UAE and Bahrain have submitted official requests to host the GCC central bank. 'The location [of the GCC central bank] is an economic and a political thing,' says Khan Zahid, vice-president and chief economist at Riyad Bank. 'The UAE and Bahrain have well-established central banks and regulatory regimes. Currency union should go ahead - 2010 is a realistic timeframe. The main thing is to establish a central bank.'
www.meed.com/economy
The GCC single currency will be pegged to the dollar when it is launched in 2010 but might be allowed to free-float within five years, Sultan bin Nasser al-Suwaidi, governor of the Central Bank of the UAE, said following a meeting of GCC central bank governors on 30 October in Abu Dhabi. Currently, all GCC currencies are pegged to the dollar, which limits central banks' control over monetary policy.
'It's a self-confident statement to stand on your own,' says Eckhart Woertz, programme manager, economics, at Dubai-based Gulf Research Centre. '[Unpegging from the dollar] makes sense as the dollar is weak and will remain so. There is a lot of imported inflation due to the peg and it makes sense from a trade aspect as one-third of imports [to the GCC] come from Europe and a third from Asia and only 10 per cent from the US.' The location of a new GCC central bank is also under discussion. Both the UAE and Bahrain have submitted official requests to host the GCC central bank. 'The location [of the GCC central bank] is an economic and a political thing,' says Khan Zahid, vice-president and chief economist at Riyad Bank. 'The UAE and Bahrain have well-established central banks and regulatory regimes. Currency union should go ahead - 2010 is a realistic timeframe. The main thing is to establish a central bank.' www.meed.com/economyThis content is only available to full MEED package subscribers (MEED magazine and MEED.com).
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