Gulf States Back Single Currency Plan



The project was thrown into disarray last year when Oman said it would not join in 2010. The UAE has since raised questions about whether Gulf states would stand by a system of dollar-pegged exchange rates designed to prepare for monetary union.


"On the unified currency, certain elements were agreed. As far as I know no changes were planned … for the unified currency. All what has been agreed upon has not changed," Bahrain’s Central Bank Governor Rasheed Al Maraj told Reuters on the sidelines of a conference in London.

"The [deadline] 2010 is a challenge. That means we need to accelerate our efforts to meet this [deadline]."

Oman announced last month it would not try to meet European Union-style economic integration criteria by the 2010 deadline.

The Omani official later said criteria including capping budget deficits at 3 per cent of gross domestic product, could constrain Oman as it seeks to diversify its economy away from dwindling oil revenue.

The UAE has since said the Gulf was reviewing the entire currency project and hoped to agree on a simpler form of monetary union.

The UAE’s central bank was the first to acknowledge that Gulf policy makers might not stand by their system of fixed exchange rates, although markets began speculating about a revaluation last year when the dollar fell around 10 per cent against the euro.

The speculation reached fever pitch when UAE Central Bank Governor Sultan Bin Nasser Al Suwaidi told Reuters this month Gulf states could decide at a March meeting in Riyadh, whether to keep or change their exchange rate regime.

Oman and Bahrain, the smallest of the six economies, have also ruled out any changes to their exchange rate policy as has Saudi Arabia.


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