IMF seeks flexible rate for GCC common currency
Thursday, August 20, 2009
Four Gulf nations planning to launch the world's second monetary union in 2010 need to adopt a flexible exchange rate for their common currency, the International Monetary Fund said yesterday.
In a report about Saudi Arabia, the Washington-based Fund said the long-standing peg between the Saudi riyal and the US dollar had ensured economic and financial stability to the world's largest oil exporter.
IMF Directors said the decline in the riyal in 2008 because of the weakening in the dollar was only temporary and could recover in the medium term.
"Some Directors encouraged the authorities to consider a more flexible exchange rate regime for the Gulf Cooperation Council (GCC) monetary union, in consultation with other members of the union," the report said.
"Directors encouraged progress toward the monetary union by developing operational responsibilities and the governance structure of the future central bank, harmonizing macro-economic statistics, and establishing an efficient payments system."
Saudi Arabia, Kuwait, Qatar and Bahrain have said they are pushing ahead with the monetary union despite the withdrawal of the UAE and Oman.
The four members have indicated their currencies would remain pegged to the dollar in the first stages of the monetary union but they would decide on a new peg at a later stage. Some officials have spoken of a basket of currencies in which the US dollar would have the lion's share. The currencies of Saudi Arabia, Bahrain and Qatar are pegged to the dollar.
Thursday, August 20, 2009
Four Gulf nations planning to launch the world's second monetary union in 2010 need to adopt a flexible exchange rate for their common currency, the International Monetary Fund said yesterday.
In a report about Saudi Arabia, the Washington-based Fund said the long-standing peg between the Saudi riyal and the US dollar had ensured economic and financial stability to the world's largest oil exporter.
IMF Directors said the decline in the riyal in 2008 because of the weakening in the dollar was only temporary and could recover in the medium term.
"Some Directors encouraged the authorities to consider a more flexible exchange rate regime for the Gulf Cooperation Council (GCC) monetary union, in consultation with other members of the union," the report said.
"Directors encouraged progress toward the monetary union by developing operational responsibilities and the governance structure of the future central bank, harmonizing macro-economic statistics, and establishing an efficient payments system."
Saudi Arabia, Kuwait, Qatar and Bahrain have said they are pushing ahead with the monetary union despite the withdrawal of the UAE and Oman.
The four members have indicated their currencies would remain pegged to the dollar in the first stages of the monetary union but they would decide on a new peg at a later stage. Some officials have spoken of a basket of currencies in which the US dollar would have the lion's share. The currencies of Saudi Arabia, Bahrain and Qatar are pegged to the dollar.