01 January 2008
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Currency confusion hits GCC states
by ArabianBusiness.com staff writer on Tuesday, 01 January 2008
At time of going to press, there was still uncertainty over the future of the five Gulf currencies’ dollar peg.
At time of going to press, there was still uncertainty over the future of the five Gulf currencies’ dollar peg.
There was uncertainty over the future of the Gulf currencies after a series of contradictory statements by the region's finance ministers, following the GCC Summit in Doha last month.
Economists and analysts had thought it likely an announcement would be made that the five GCC currencies still pegged to the dollar - the UAE dirham, Bahraini dinar, Omani rial, Qatari riyal and Saudi riyal - would either be revalued or pegged to a basket of currencies to compensate for the declining US dollar.
Some exchange houses in the UAE revalued the dirham by up to 17% during the GCC Summit, wary of losing money if the dirham was revalued. They were later penalised by the UAE Central Bank.
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The dollar peg was reportedly not discussed at the summit, but a series of public comments since then by the heads of monetary policy in the five states has fuelled speculation that there could be at least a one-time revaluation of some of the currencies.
A local newspaper reported that Bahrain's Finance Minister Shaikh Ahmad Bin Mohammad Al Khali has told the advisory Shura council that the dinar will move from the dollar peg to a basket of currencies without appreciating.
Other reports have indicated that Qatar and the UAE, which have the highest inflation rates in the Gulf, are most likely to switch to a link with a basket of currencies, while Bahrain, Saudi Arabia and Oman maintain their peg to the dollar with a revaluation.
The US Federal Reserve cut interest rates by 25 basis points last month, a move that was copied by Saudi Arabia, the UAE, Bahrain and Qatar, despite concerns that it could fuel inflation.
Kuwait dropped the dinar's peg to the dollar at the World Economic Forum on May 20 last year, moving to a trade-weighted basket of currencies which is still dominated by the US currency. The dinar has appreciated by 5.5% since then.
Any decision by the other GCC states away from the dollar peg could delay the move to a Gulf single currency, which is still scheduled for 2010, although Oman has said it will not meet this deadline.
Sunday, January 27, 2008
Saturday, January 26, 2008
1982: THE UNIFIED ECONOMIC AGREEMENT BETWEEN THE COUNTRIES OF THE GULF COOPERATION COUNCIL
HISTORY:
In 1982, the GCC countries ratified an agreement that stated clearly "the member states shall seek to coordinate their financial, monetary and banking policies and enhance cooperation between monetary agencies and central banks, including an endeavor to establish a joint currency in order to further their economies."
CHAPTER SIX
FINANCIAL AND MONETARY COOPERATION
ARTICLE 2 1
Member States shall seek to unify investment rules and regulations in order to achieve a joint investment policy aimed at directing their domestic and foreign investments towards serving their interest, and realizing their peoples' aspirations for development and progress.
ARTICLE 2 2
Member States shall seek to coordinate their financial, monetary and banking policies
and enhance cooperation between monetary agencies and central banks, including the endevour to establish a joint currency in order to further their desired economic.
ARTICLE 2 3
Member States shall seek to coordinate their external policies in the sphere of
international and regional development aid.
In 1982, the GCC countries ratified an agreement that stated clearly "the member states shall seek to coordinate their financial, monetary and banking policies and enhance cooperation between monetary agencies and central banks, including an endeavor to establish a joint currency in order to further their economies."
CHAPTER SIX
FINANCIAL AND MONETARY COOPERATION
ARTICLE 2 1
Member States shall seek to unify investment rules and regulations in order to achieve a joint investment policy aimed at directing their domestic and foreign investments towards serving their interest, and realizing their peoples' aspirations for development and progress.
ARTICLE 2 2
Member States shall seek to coordinate their financial, monetary and banking policies
and enhance cooperation between monetary agencies and central banks, including the endevour to establish a joint currency in order to further their desired economic.
ARTICLE 2 3
Member States shall seek to coordinate their external policies in the sphere of
international and regional development aid.
No revaluation, Bahrain insists
by Natsuko Waki on Sunday, 27 January 2008
Bahrain's crown prince said on Saturday that even talking about revaluing the local currency against the dollar was irresponsible and the country had no plans to adjust the value of the dinar.
Speaking to newswire Reuters on the sidelines of the World Economic Forum (WEF), Sheikh Salman bin Hamad Al-Khalifa also said Bahrain's economy will grow around 7% this year and he was not concerned by the dollar's recent fall.
Speculation intensified that Gulf countries might revalue their currencies against a falling dollar after Kuwait broke ranks and started tracking a currency basket in May.
"Even talking about revaluation is irresponsible, and very counter productive. We have no intention of revaluing - plain, black and white," Sheikh Salman said.
Bahrain is one of the six Gulf currencies preparing for monetary union as early as 2010.
After hitting a record low against a basket of currencies, the dollar has failed to stage a lasting recovery due to concerns about a recession in the US economy.
"These things change very quickly by the world event or leadership, or changes in public sentiment. So I'm not concerned. Currencies go up and down," said Sheikh Salman, who runs the Economic Development Board, which oversees economic strategies.
He noted the world has experienced difficulties surrounding the US economy in the past but growth of Asian emerging countries are cushioning the damage this time.
"The main difference of course this time is that we have India and China rising. So the projections are that the world economy will grow by 4%," he said.
Bahrain is on a drive to restructure state firms ahead of planned privatisation and overhaul the labour market to give more jobs to Bahrainis over foreigners who make up about a third of the kingdom's population.
But analysts say the crown prince and his father's uncle Sheikh Khalifa bin Salman Al-Khalifa - prime minister for more than 35 years - are split over reforms and vision for the country's future.
In a rare display of royal disharmony, Bahrain's King Hamad bin Isa Al-Khalifa warned in January the government should not delay reforms led by the crown prince.
Sheikh Salman said on Saturday more needed to be done.
"I'm never completely satisfied, otherwise I will stop the reform process so one has to be always a little bit more ambitious and we have many ideas to pursue."
On the overall economy, Sheikh Salman expected growth of 7% this year, in line with the previous few years. (Reuters)
http://www.arabianbusiness.com/509269-no-revaluation-bahrain-insists
Bahrain's crown prince said on Saturday that even talking about revaluing the local currency against the dollar was irresponsible and the country had no plans to adjust the value of the dinar.
Speaking to newswire Reuters on the sidelines of the World Economic Forum (WEF), Sheikh Salman bin Hamad Al-Khalifa also said Bahrain's economy will grow around 7% this year and he was not concerned by the dollar's recent fall.
Speculation intensified that Gulf countries might revalue their currencies against a falling dollar after Kuwait broke ranks and started tracking a currency basket in May.
"Even talking about revaluation is irresponsible, and very counter productive. We have no intention of revaluing - plain, black and white," Sheikh Salman said.
Bahrain is one of the six Gulf currencies preparing for monetary union as early as 2010.
After hitting a record low against a basket of currencies, the dollar has failed to stage a lasting recovery due to concerns about a recession in the US economy.
"These things change very quickly by the world event or leadership, or changes in public sentiment. So I'm not concerned. Currencies go up and down," said Sheikh Salman, who runs the Economic Development Board, which oversees economic strategies.
He noted the world has experienced difficulties surrounding the US economy in the past but growth of Asian emerging countries are cushioning the damage this time.
"The main difference of course this time is that we have India and China rising. So the projections are that the world economy will grow by 4%," he said.
Bahrain is on a drive to restructure state firms ahead of planned privatisation and overhaul the labour market to give more jobs to Bahrainis over foreigners who make up about a third of the kingdom's population.
But analysts say the crown prince and his father's uncle Sheikh Khalifa bin Salman Al-Khalifa - prime minister for more than 35 years - are split over reforms and vision for the country's future.
In a rare display of royal disharmony, Bahrain's King Hamad bin Isa Al-Khalifa warned in January the government should not delay reforms led by the crown prince.
Sheikh Salman said on Saturday more needed to be done.
"I'm never completely satisfied, otherwise I will stop the reform process so one has to be always a little bit more ambitious and we have many ideas to pursue."
On the overall economy, Sheikh Salman expected growth of 7% this year, in line with the previous few years. (Reuters)
http://www.arabianbusiness.com/509269-no-revaluation-bahrain-insists
Kuwait pegs dinar to basket of currencies
KUWAIT CITY (Thomson Financial) - Kuwait on Sunday pegged its dinar to a basket of international currencies after more than four years of linking the local currency to the dollar, in a bid to reduce inflationary pressures.
The oil-rich emirate had historically pegged the dinar to a basket of currencies before pegging it to the dollar in January 2003 in preparation for single currency in Gulf Cooperation Council states planned for 2010.
The value of the dinar immediately jumped from 289.14 fils to the dollar to 288.01 fils on the news. There are 1,000 fils in one Kuwaiti dinar.
Central Bank (other-otc: CHPA.PK - news - people ) governor Sheikh Salem Abdul Aziz al-Sabah said in a statement quoted by the state-run KUNA news agency that a sharp decline in the dollar's value had a negative impact on the Kuwaiti economy in the past two years.
Kuwaiti economist Hajjaj Bukhdour said the decision will help reduce 'imported inflation.'
Sheikh Salem reiterated Kuwait's commitment to plans for a single currency among the six members of the GCC.
Bukhdour said Kuwait's measure reflected difficulties faced by the alliance to achieve their target by 2010, especially after Oman had announced it will not be able to meet the target date.
tf.TFN-Europe_newsdesk@thomson.com
http://www.forbes.com/markets/feeds/afx/2007/05/20/afx3739653.html
afp/hjp
The oil-rich emirate had historically pegged the dinar to a basket of currencies before pegging it to the dollar in January 2003 in preparation for single currency in Gulf Cooperation Council states planned for 2010.
The value of the dinar immediately jumped from 289.14 fils to the dollar to 288.01 fils on the news. There are 1,000 fils in one Kuwaiti dinar.
Central Bank (other-otc: CHPA.PK - news - people ) governor Sheikh Salem Abdul Aziz al-Sabah said in a statement quoted by the state-run KUNA news agency that a sharp decline in the dollar's value had a negative impact on the Kuwaiti economy in the past two years.
Kuwaiti economist Hajjaj Bukhdour said the decision will help reduce 'imported inflation.'
Sheikh Salem reiterated Kuwait's commitment to plans for a single currency among the six members of the GCC.
Bukhdour said Kuwait's measure reflected difficulties faced by the alliance to achieve their target by 2010, especially after Oman had announced it will not be able to meet the target date.
tf.TFN-Europe_newsdesk@thomson.com
http://www.forbes.com/markets/feeds/afx/2007/05/20/afx3739653.html
afp/hjp
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