Emirates Business 24-7, 24 November 2009
The UAE's withdrawal from the Gulf monetary union was based on fundamental reservations, including currency plans and the role of the monetary council, the UAE Central BankUAE Central BankLoading... chief said.
"The UAE had fundamental and secondary reservations on the monetary union agreement," state-agency Wam quoted Governor Sultan bin Nasser Al Suwaidi as saying.
The UAE's pull out of the region's single currency project in May came after the Saudi Arabian capital Riyadh was chosen to host the headquarters of the planned regional central bankcentral bankLoading....
Suwaidi said the central bankcentral bankLoading...'s location decision was "political" and did not consider the advantages of the UAE banking sector.
But this was not the only reason. One of the fundamental reservations, he said, was "sidelining the GCC unit of account" issue.
The monetary union agreement had no mechanism which would ensure "gradual adoption of a unit of account by the GCC countries for a reasonable period of time to test their monetary policy and assess what can be amended before moving it into the economy, and its impact on the GCC banking systems", Suwaidi said.
A unit of account was adopted by European nations ahead of monetary union and the introduction of euro notes and coins. The second fundamental reservation was the role of the GCC monetary council "which was limited to conducting studies while it should have had a role in monetary policy and other practical areas", the governor said.
The governor said the UAE had additional reservations on the monetary union agreement such as "the absence of a unified inflation index".
He said the UAE withdrawal from monetary union was not a reason for the country to change its monetary policy, and the dirham will remain pegged to the dollar.
The UAE has no plan to de-link its currency from the dollar as it's "the best medium of exchange in international trade", Suwaidi said.
Speculation that Gulf states would abandon their currency pegs reached a peak in November 2007 following Kuwait's decision in May that year to link the dinar to a basket of currencies instead of solely the dollar. The US currency weakened to within half a cent of $1.50 per euro that November, raising the cost of imports to the Gulf and fueling inflation. Suwaidi said on October 21 that the country will wait for the US before it starts to raise interest rates.
The problems facing the real estate sector of Dubai, the second-biggest of seven sheikhdoms that make up the UAE, will take years to be resolved, Suwaidi said.
By Staff Writer
Emirates Business 24/7 2009
The UAE's withdrawal from the Gulf monetary union was based on fundamental reservations, including currency plans and the role of the monetary council, the UAE Central BankUAE Central BankLoading... chief said.
"The UAE had fundamental and secondary reservations on the monetary union agreement," state-agency Wam quoted Governor Sultan bin Nasser Al Suwaidi as saying.
The UAE's pull out of the region's single currency project in May came after the Saudi Arabian capital Riyadh was chosen to host the headquarters of the planned regional central bankcentral bankLoading....
Suwaidi said the central bankcentral bankLoading...'s location decision was "political" and did not consider the advantages of the UAE banking sector.
But this was not the only reason. One of the fundamental reservations, he said, was "sidelining the GCC unit of account" issue.
The monetary union agreement had no mechanism which would ensure "gradual adoption of a unit of account by the GCC countries for a reasonable period of time to test their monetary policy and assess what can be amended before moving it into the economy, and its impact on the GCC banking systems", Suwaidi said.
A unit of account was adopted by European nations ahead of monetary union and the introduction of euro notes and coins. The second fundamental reservation was the role of the GCC monetary council "which was limited to conducting studies while it should have had a role in monetary policy and other practical areas", the governor said.
The governor said the UAE had additional reservations on the monetary union agreement such as "the absence of a unified inflation index".
He said the UAE withdrawal from monetary union was not a reason for the country to change its monetary policy, and the dirham will remain pegged to the dollar.
The UAE has no plan to de-link its currency from the dollar as it's "the best medium of exchange in international trade", Suwaidi said.
Speculation that Gulf states would abandon their currency pegs reached a peak in November 2007 following Kuwait's decision in May that year to link the dinar to a basket of currencies instead of solely the dollar. The US currency weakened to within half a cent of $1.50 per euro that November, raising the cost of imports to the Gulf and fueling inflation. Suwaidi said on October 21 that the country will wait for the US before it starts to raise interest rates.
The problems facing the real estate sector of Dubai, the second-biggest of seven sheikhdoms that make up the UAE, will take years to be resolved, Suwaidi said.
By Staff Writer
Emirates Business 24/7 2009