GCC states have spent years struggling with limited policy options for containing inflation. But the financial turmoil is highlighting the competing policy aims that individual states have held all along.
In one sense, the liquidity crisis is acting as a brake on the overheating economies. But it is a brake over which central banks have no control and, if anything, the tightening of money supply has now gone too far.
Overstretched banks are struggling to access funding and many are pulling out of the project finance market all together.
Although most central banks have expressed sympathy for the banking sector, only the UAE has taken decisive action by providing AED50bn ($13.6bn) in additional liquidity, although it is not yet clear how much impact it will have.
The injection of funds has also done nothing to overcome concern that if Lehman Brothers can collapse, anyone can.
The risk for the UAE is that having done this much, it is impossible to know how much more may be needed, or for how long.
Other GCC central banks have said they will provide liquidity to banks that need it, but have refrained from announcing specific measures. Kuwait has injected capital into its stock market, but has rejected demands from parliament to boost liquidity.
Any injection of fresh capital will only increase inflation. Unless all GGC states do so, it will push them further apart, threatening progress towards a common currency.
The crisis is revealing each country’s priorities in promoting growth, controlling inflation or supporting economic integration. The UAE has backed growth, while most others seem more concerned with inflation, although Kuwait has a foot in both camps.
Despite the show of unity earlier in September when GCC central bank governors met in Jeddah to discuss monetary union, events since then show how different their aims are.