Study on single currency deadline due this year

Study on single currency deadline due this year

by Joel Bowman on Monday, 24 March 2008 The GCC is due to complete a study into the feasibility of establishing a monetary union by the current 2010 deadline by the end of this year, its secretary-general said on Sunday.

“We are carrying out a study now to see what results we will have by the end of the year,” Abdul Rahman Al Attiyah said, quoted newswire Bloomberg.

Gulf leaders requested the study in December at annual GCC summit in Doha, despite publicly backing the deadline.

At the end of the summit leaders issued a communiqué that said the GCC remained committed to a 2010 target date for establishing a GCC monetary union and single currency - something analysts regard this as almost impossible.

UAE daily Emirates Business 24/7 reported in January that Gulf leaders asked ministers and central bank governors to come up with a new date and timeframe for establishing the monetary union at the summit, citing official documents.

The deadline has been in question ever since Oman said in 2006 it would not join in 2010 over concerns that spending targets could constrain economic growth.

The deadline received another blow in May last year when Kuwait broke ranks with its neighbours and depegged its currency from the dollar, citing the dollar's slide against other currencies as one of the factors fuelling inflation.

GCC members had agreed to peg their currencies to the dollar as part of preparations for the eventual introduction of a single currency.

Record inflation across the Gulf has piled pressure on central banks to follow Kuwait's lead, raising further concerns over the introduction of the monetary union.

A report released by investment bank Morgan Stanley in February said the 2010 target date was highly unlikely, adding that GCC members were more likely to revalue their currencies unilaterally.

Analysts have predicted the UAE and Saudi may break ranks from the GCC’s declared schedule for establishing a common currency and "go it alone", with other states joining at a later date.