Muscat raises questions on single currency timetable
Muscat has thrown uncertainty on the timetable for GCC monetary union by announcing that it will not adopt the proposed single currency at its scheduled launch in 2010. Riyadh added further doubts by reiterating its reservations about the convergence timetable.
On 13 December, Oman's deputy national economy minister Abdul Malik bin Abdullah al-Hanai confirmed that Muscat would not join the currency union at the scheduled launch date and questioned the feasibility of the schedule, pointing out that agreements on a customs union and common market have still to be reached.
However, analysts believe Muscat's decision to postpone monetary union membership will not affect the future of the project. 'Oman's economy is relatively small. If the UAE or Saudi Arabia opted out, then the whole idea would be dead,' says Gulf Research Centre economics programme manager Eckhart Woertz.
'For the GCC, this is more of a political and psychological blow,' says Monica Malik, a senior regional economist at Standard Chartered Bank . 'It highlights the difficulties [of monetary union] but it won't result in other countries leaving or stopping the plans from happening.'
In late November, Central Bank of the UAE governor Nasser Sultan al-Suwaidi said the convergence criteria had been decided and that the GCC governments were now discussing the name of the new currency. The dollar currency peg applied across the GCC means monetary policy in the sultanate is unlikely to change or diverge from the future union. But the decision not to join with other monetary union members means the sultanate will not benefit from rising trade within the GCC.
'Oman might be the one to lose out,' warns Malik. 'A big part of the union is greater economic integration. It might affect the way other countries see Oman for doing business going forward, if Muscat is perceived as being outside the union. The economic strength and size of the bloc, such as foreign exchange reserves, will be much stronger than Oman's.'
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