“The dollar peg has served GCC countries strongly over the past 30 years and will continue to do so,” Nasser Saidi, DIFC’s chief economist, said during a conference.
Kuwait, the fourth-largest oil producer in the Middle East, announced last month it was delinking its currency from the dollar and linking it to a basket of currencies in an effort to curb the country’s rising inflation.
The move has since raised a debate whether other Gulf states should do the same to halt soaring inflation.
Qatar has said its inflation rate rose 15% in the first quarter of 2007 compared with a year earlier.
However, Saidi said the region’s rising inflation isn’t caused by the depreciating dollar, but by the high price of certain commodities.
“The main argument for those who are calling to change the peg is that the dollar has depreciated during recent years, which is causing inflation. But that isn’t true – inflation in the GCC isn’t imported and has nothing to do with the dollar peg,” Saidi said. “The price of some commodities will decrease soon.”
A recent IMF report also said inflation rates in the GCC region should fall this year. Ali al-Raisi, chief economist with the Central Bank of Oman, agreed that the remaining GCC states should keep their dollar peg and said Oman doesn’t have plans to delink from the greenback.
“There are no plans to change the peg of the dollar in Oman, and I believe the rest of GCC countries have no such plans as well,” he said.
