“The physical currency, it will not be in 2010,” Nasser 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, the GCC member states would likely decide on the name of the currency and the rate at which each currency would be converted by 2010, Al-Kaud said.
The GCC states have until December to ratify a monetary union agreement and the charter governing the monetary council — both of which were approved by Arab 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 a region where currencies have long been pegged to the US dollar.
Analysts said it was now important for the GCC 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 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.”
With a fully-fledged common currency off the agenda at least until next year, GCC central banks are focused on helping their financial institutions weather the global crisis.
Asked if the crisis had played any role in the delay, Bahraini Central Bank Gov. Rasheed Al-Maraj said: “Before 2007, we knew it would be a very challenging timeframe to meet the deadline. The most important thing is the monetary union agreement. That is the cornerstone for the monetary union. What happens next are technicalities.”
