Governors from the six-member Gulf Cooperation Council agreed in April to meet in Doha to lay down the principles for Monetary Union (MU) in 2010, according to GCC officials.
Success may ease pressure on Gulf governments to revalue their currencies against the dollar or drop the links completely, which has intensified as inflation accelerates to records in the region. US Treasury Secretary Henry Paulson said last week he’d been assured the Arab states will maintain the pegs, helping to prevent a further weakening of the dollar.
"The plan for currency union does seem to have received a fresh lease of life in recent months," said Simon Williams, chief Middle East economist at HSBC Holdings Plc in Dubai.
Any sign the plan "is in disarray again would refocus attention on the possibility" of currency revaluations.
Contracts to buy UAE dirhams and Saudi riyals in 12 months’ time have fallen 0.4 per cent against the dollar since Paulson said on June 2 that Gulf states are unlikely to drop their links to the dollar following meetings with Saudi Arabian and Qatari government officials.
Holding the line: "They probably will try to hold the line until 2010, until they’ve accomplished currency union, and then think about changing," said Eckart Woertz, chief economist at the Gulf Research Centre, in a telephone interview from Berlin.
"The market will be looking for evidence that the renewed enthusiasm for currency union is being translated into concrete agreements on the many technical, economic and political disagreements that have impeded progress so far," Williams said.
