Top Arab banker urges UAE to rejoin FX union
Feb 22, 2010 at 11:25
By Rajiv Sekhri
ABU DHABI - The UAE should rejoin the Gulf monetary union, the head of the Arab Monetary Fund (AMF) urged on Tuesday, saying it would be "in the interest of everybody if the Arab world's second largest economy was part of such a union”.
Jassem al-Mannai said the monetary union should be a "collective action" between the six-nation Gulf Cooperation Council (GCC), two members of which have now pulled out of the union.
"It is in the interest of everybody to have and reach the suitable, appropriate arrangement regarding the project of the monetary union,” Mannai told Maktoob News on the sidelines of the Abu Dhabi Economic Forum.
The UAE pulled out of the monetary union in May 2009 in protest at a decision to base the joint central bank in Saudi Arabia, throwing the viability of the project into question.
UAE Central Bank Governor Sultan Nasser al-Suweidi said earlier this month the country was not discussing whether to rejoin the union.
Economists and analysts say the UAE should put aside political differences and work toward a common euro-style currency and economic bloc for the GCC.
Kuwait, which heads up the GCC this year, has made bringing the UAE and Oman back into the monetary union a priority of its presidency.
Oman, which pulled out in 2006, said last month that it had no plans to review its decision to withdraw.
Saudi Arabia, Kuwait, Qatar and Bahrain are pushing ahead with the union, in June last year signing a pact to press ahead with the project.
The GCC initially planned to create the monetary union and a Gulf single currency in 2010, but last year scrapped the deadline.
A new timetable has yet to be decided on, but analysts say the bloc is unlikely to adopt a single currency in 2015.
Mannai also said that the Gulf monetary union should discuss "collectively and in coordination among themselves" whether to keep their currencies’ peg to the dollar. All Gulf states bar Kuwait peg their currencies to the U.S. currency.
"I believe this issue should not be dealt with individually," Mannai said.
The dollar peg issue has regained momentum as the dollar retreats and oil prices recover. The peg became a huge issue in 2008 when record oil prices saw the greenback plunge, driving up inflation in the Gulf as the cost of goods imported goods soared.
Mannai last year called on Gulf states to review their peg amid calls from Russia and China to start considering a reserve currency other than the dollar.
Gulf states have yet to decide on the peg, but several officials have questioned whether it is necessary.
Feb 22, 2010 at 11:25
By Rajiv Sekhri
ABU DHABI - The UAE should rejoin the Gulf monetary union, the head of the Arab Monetary Fund (AMF) urged on Tuesday, saying it would be "in the interest of everybody if the Arab world's second largest economy was part of such a union”.
Jassem al-Mannai said the monetary union should be a "collective action" between the six-nation Gulf Cooperation Council (GCC), two members of which have now pulled out of the union.
"It is in the interest of everybody to have and reach the suitable, appropriate arrangement regarding the project of the monetary union,” Mannai told Maktoob News on the sidelines of the Abu Dhabi Economic Forum.
The UAE pulled out of the monetary union in May 2009 in protest at a decision to base the joint central bank in Saudi Arabia, throwing the viability of the project into question.
UAE Central Bank Governor Sultan Nasser al-Suweidi said earlier this month the country was not discussing whether to rejoin the union.
Economists and analysts say the UAE should put aside political differences and work toward a common euro-style currency and economic bloc for the GCC.
Kuwait, which heads up the GCC this year, has made bringing the UAE and Oman back into the monetary union a priority of its presidency.
Oman, which pulled out in 2006, said last month that it had no plans to review its decision to withdraw.
Saudi Arabia, Kuwait, Qatar and Bahrain are pushing ahead with the union, in June last year signing a pact to press ahead with the project.
The GCC initially planned to create the monetary union and a Gulf single currency in 2010, but last year scrapped the deadline.
A new timetable has yet to be decided on, but analysts say the bloc is unlikely to adopt a single currency in 2015.
Mannai also said that the Gulf monetary union should discuss "collectively and in coordination among themselves" whether to keep their currencies’ peg to the dollar. All Gulf states bar Kuwait peg their currencies to the U.S. currency.
"I believe this issue should not be dealt with individually," Mannai said.
The dollar peg issue has regained momentum as the dollar retreats and oil prices recover. The peg became a huge issue in 2008 when record oil prices saw the greenback plunge, driving up inflation in the Gulf as the cost of goods imported goods soared.
Mannai last year called on Gulf states to review their peg amid calls from Russia and China to start considering a reserve currency other than the dollar.
Gulf states have yet to decide on the peg, but several officials have questioned whether it is necessary.