“The UAE has decided not to be party to the accord on Gulf monetary union” between the Gulf Cooperation Council nations, the official WAM news agency quoted a Foreign Ministry spokesman as saying.
“The general secretariat of the GCC was officially informed today,” the unnamed official said. The energy-rich GCC groups the UAE with Bahrain, Kuwait, Oman, Qatar and Saudi Arabia.
The UAE had expressed reservations over the monetary union after an informal GCC meeting in Saudi Arabia on May 5 decided that Riyadh, which is home to the GCC headquarters, would host the future banking authority.
Oman announced in 2007 that it would not join the scheme.
“We believe that with the second-largest economy pulling out, the monetary union project is effectively dead,” EFG-Hermes investment bank said in a statement.
“It is detrimental… The fact that they will not be involved is a big loss,” EFG-Hermes’ Dubai-based economist Monica Malik said. “With Saudi Arabia being the largest economy in the planned union, Riyadh will be the party determining the monetary policy under the current convergence criteria,” she added. Saudi economist Ali Al Daqaq also echoed fears that the proposed union will be set back by the UAE decision.
“This decision will slow down, if not abolish, the whole monetary union process, and will slowdown the Gulf economic integration,” he said.
Kuwaiti economist Hajaj Bukhdour said the UAE withdrawal “will strip the monetary union of its anticipated importance,” and delay it by “many years”.
