GCC MONETARY UNION
Once launched, the single Gulf
currency is expected to roar,
thanks to petro-wealth. But before
it crosses the starting line, there
are still a whole host of issues
to be resolved – not least its name
BY HELEN BURGGRAF
With the governors of the
central banks of the Gulf
Cooperation Council (GCC)
states last month approving
a draft agreement to join
forces through monetary
union, a top expert there
has suggested that the proposed
new currency may
leap close to the top of
the world currency league
soon after its launch.
Nasser Saidi, chief economist
at the Dubai International
Financial Centre
(DIFC), predicts that the
wealth of the oil-rich Gulf
region will propel the new
currency to a top global
ranking, “alongside the
euro and the dollar”.
In an exclusive interview
with International
Adviser, Dr Saidi claims
that at its current 11% rate
of growth, the GCC will be
the world’s fifth biggest
economy by 2020.
The Gulf is already so
affluent and has been so
efficient at reinvesting its
petro-dollars that the
annual return on its invest-
Inflation rate criterion
Country ’07 GDP ’07 inflation ’07 inflation Difference
$bn rate % rate limit % %
Bahrain 16.16* 3.3 ��8.91 5.61
Kuwait 112.12 5.53 ��8.91 3.38
Oman 40.34** 5.9 ��8.91 3.01
Qatar 71.04** 13.76 ��8.91 -4.85
Saudi Arabia 381.96** 4.13 ��8.91 4.78
UAE 198.67 11.1* ��8.91 -2.19
* Estimated data. ** Preliminary data. Source: Dubai International Finance Centre
ments, at about $200bn,
now exceeds the value of
its annual oil and gas
exports, he notes.
l Financial advantage
Among the major beneficiaries
of monetary union, Dr
Saidi adds, will be the Gulf
region’s banks and financial
institutions, including
its rapidly growing wealth
management industry.
Last month’s decision
by the finance ministers of
the GCC states to approve
draft plans to set up a monetary
council and create a
single currency had been
expected, and was seen as
a major step towards monetary
union.
But the original launch
date for monetary union
of 2010 was not agreed,
leaving observers to suggest
it is all but certain to
be pushed back. Also left
undecided was the location
of the proposed new
central bank, according to
reports from Jeddah, Saudi
Arabia, where the GCC
finance ministers met.
l Key meeting
The heads of state of the
GCC countries must give
their final approval at a
meeting in Muscat, Oman,
next month, if the plan for
a single currency is to go
ahead. Ironically, Oman is
the only one of the GCC
countries that has said it
is not interested in joining
the monetary union at
its inception.
The other GCC countries
are Bahrain, Kuwait,
Qatar, Saudi Arabia and
the United Arab Emirates.
The plans to introduce
a single GCC currency fol-
OCTOBER 2008 [www.international-adviser.com] INTERNATIONAL ADVISER
analysis
One for all
and all for one
lows the introduction of
a GCC common market
eight months ago, and the
founding of the council,
for purposes of economic
integration, in 1981.
For now, the single currency
does not even have
a name, nor has it been
officially decided whether
it will be pegged to
the dollar – like five of
the existing GCC member
states’ currencies are – or
to a basket of currencies,
like Kuwait’s dinar.
It could also be allowed
to float freely, but Gulf
sources say this unlikely in
the beginning.
21
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