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Single currency 'not in next 5 years'

Riyadh, May 26, 2010

Gulf countries are unlikely to launch a planned single currency in the next five years given all the preparation required, the head of the Gulf Cooperation Council (GCC) said.

Abdulrahman Al-Attiyah, Secretary-General of the GCC, also said he expected the United Arab Emirates and Oman, which quit the single currency project, would eventually join the monetary union but not until after the currency had been launched successfully.   

Last year, GCC abandoned an initial 2010 deadline for issuing common notes and coins. It has not specified a new timeframe for the launch but many analysts see 2015 as a likely launch date.

"In a reflection to the sophisticated nature of the technical, legislative and institutional requirements, I don't foresee the currency to be launched in 2015," Al-Attiyah said in a written response to questions emailed by Reuters.

Four Gulf countries pursuing the union -- Saudi Arabia, Kuwait, Qatar and Bahrain -- launched a forerunner for a Gulf central bank in March, but declined to reveal a roadmap for a single currency.

Gulf monetary union was designed to emulate the euro zone and Al-Attiyah said the GCC should draw lessons from the euro zone debt crisis. He indicated that the return of the UAE and Oman was still on the cards, but rather at a later stage.

The UAE withdrew from the project a year ago in protest at a decision to house the Gulf monetary council in the Saudi capital Riyadh. Oman quit the project in 2006 and has repeatedly said it was unlikely to rejoin anytime soon.

"The UAE and Oman are neither objecting to the project nor eliminating the possibility to join. In fact, they are supporting the project by being active members in the technical loop with respect to the single payment system and the harmonized banking supervision legislations," Al-Attiyah said.

"The monetary union project is in the preparatory phase and the possibility for both countries to be part of it remains high, especially if a successful and strong currency is launched," he said.

Monetary union in the region has been delayed by old political rivalries as some countries did not want Saudi Arabia, the largest Arab economy and the world's top oil exporter, to hold too much influence.   

Kuwait's plan to stick to pegging its dinar to a currency basket for the foreseeable future also raised questions as the other three countries favour their currency links to the US
dollar. Al-Attiyah, however, said that was not a problem.

"The current exchange rate scheme in Kuwait is not an obstacle by all means since the Kuwaiti dinar still moves closely in an almost identical path with the rest of GCC national currencies," Al-Attiyah said.   

"It is rather an enlightening experience for the future central bank when manufacturing the single exchange rate policy," he said. - Reuters




Tags: GCC | euro | single currency | Gul |

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