Qatar urges GCC to bridge currency rifts

Qatar urges GCC to bridge currency rifts
Web posted at: 2/26/2008 4:38:34
Source ::: AFP
DOHA • The Prime Minister and Foreign Minister H E Sheikh Hamad bin Jassem bin Jabor Al Thani urged Gulf states to bridge differences over a single currency, saying monetary union could avert possible unilateral revaluations designed to check soaring inflation.

Qatar's dollar-pegged riyal is undervalued by as much as 30 percent and currency revaluation is being studied, among several options, to check inflation, Sheikh Hamad bin Jassem said. Inflation hit 13.74 percent in the fourth quarter. "It's now the time for the Gulf to have its own currency," Sheikh Hamad bin Jassem said. "We are thinking about it and in talks ... we are discussing with Gulf countries, but there is no consensus."

Qatar would prefer to make any change to its currency policy in concert with its Gulf partners preparing for monetary union as early as 2010, the Prime Minister said.

"We prefer always to act with all the GCC countries," said Sheikh Hamad bin Jassem. Qatar currently chairs the six-nation Gulf Cooperation Council.

Asked how long Qatar could continue with its existing foreign exchange regime, he said: "We cannot give a time. It is something that we have to see how it goes and look at where the dollar is going."

Rifts in Gulf monetary policy widened in May when Kuwait broke ranks with its neighbours by severing its dollar peg in favour of a basket of currencies, saying a weak dollar was driving imported inflation.

Oman has said it will not join a single currency at all, and United Arab Emirates Central Bank Governor Sultan Nasser Al Suweidi said in November he was under mounting social and economic pressure to drop the peg.

Drop the peg: Greenspan

ABU DHABI • Former US Federal Reserve chairman Alan Greenspan yesterday advised Gulf states whose currencies are pegged to the US dollar to float their currencies as a means to curb inflation. "I actually think floating is better than fixing or revaluation" of the exchange rate against the flagging dollar, he told a corporate leadership forum in the United Arab Emirates.