Unified Currency in the Arabian Gulf Countries

Unified Currency in the Arabian Gulf Countries

Introduction

A plan to unify the currencies of Arab Gulf States by 2010 is a challenge, but could be achieved if countries cooperate, the governor of Bahrain's central bank said last week. In an interview with the London-based Asharq al-Awsat newspaper, governor Rasheed al-Maraj said meeting the deadline would require a speedy decision-making process. A spokesman at the bank refused to confirm or deny the remarks. The Gulf Cooperation Council (GCC) countries of the United Arab Emirates, Kuwait, Qatar, Bahrain, Saudi Arabia and Oman have said that they plan to introduce a single currency by 2010. However, Oman has announced that it will not be part of the initial start-up in three years. Instead, it will join at a later date.

Unified Currency in the Arabian Gulf Countries

This has raised doubts over whether the currency will go live in 2010. Earlier this month, the central bank of Saudi Arabia said the deadline was "tight" and Bahraini Crown Prince Shaikh Salman bin Hamad al-Khalifa expressed doubts over meeting it. In the interview, Al-Maraj said he had not received any official orders to postpone the unified Gulf Currency. Qatari finance minister Yousef Hussain Kamal countered fears that support for the unified currency would fizzle out by saying that Doha would continue negotiations to ensure that implementation takes place in less than three years. Gulf oil producers need a strong single currency, and are watching the euro zone's troubles, but their goal is still a long way off, said Shaikh Mohammed bin Essa Al-Khalifa, the chief executive of the Bahrain Economic Development Board.

Central bankers from Saudi Arabia, Kuwait, Qatar and Bahrain launched a forerunner for a joint central bank in March but did not give a target date for setting up the single currency. 'Currency union gives us control of our monetary policy, which is de facto run by the Fed. It is still a long-term goal and the concept is still in our sights, but we are watching as the euro goes through a crisis,' Shaikh Mohammed said. 'What we need in the Gulf is a currency with sound fundamentals,' he told a conference. The Gulf countries, which peg their currencies to the dollar except for basket-linked Kuwait, last year abandoned an initial 2010 deadline for issuing common notes and coins, saying the joint monetary council would draw a new timeline.

In December, ...