Officials Deny Single Gulf Currency Launch
The Gulf Monetary Council has denied media reports concerning the finalisation of the launch of a single currency for Bahrain, Kuwait, Qatar and Saudi Arabia.
Earlier this week, media reports claimed that the four GCC countries will announce a common currency by the end of this year.
The currency would reportedly be pegged to the dollar, the report said without revealing its sources.
However the Gulf Monetary Council has dismissed the rumours.
“The Monetary Council affirms that the reports by some newspapers and websites over the date of the issuing of the single Gulf currency are completely false, not based on accurate information nor reliable sources,” the council said in a statement published by Kuwait News Agency.
The Monetary Council is mandated with placing regulations for the establishment of the Gulf Central Bank and completing the establishment of the Monetary Union.
Media reports have also claimed that Oman and the UAE will not be part of the common currency.
Sultan Nasser Al Suwaidi, UAE’s central bank governor, told the media last month that the UAE has withdrawn from the monetary union.
He dismissed the formation of a GCC wide currency saying that currencies cannot be unified until a common Gulf market, which is a recognised financial bloc, is formed.
The GCC countries have been discussing the formation of a currency union, similar to the Eurozone, for the last 15 years.
However European Central Bank officials have suggested that the GCC should not introduce a common currency without a clear objective. (Gulf Business)
Most of the GCC currencies are already pegged on a fixed parity basis, with US Dollar for international trade settlements, and perhaps, there is no major upside in creating a GCC common currency. However in order to avoid risks associated with the fall (weakening) of US Dollar in future, the GCC countries can convert their long term oil and gas sale agreements in Euro, US dollar and Yuan with some upper limits, that could effectively counter the dollar fall risks. Single currency reliance is definitely dangerous for the international trade reliant economies, and therefore contracts diversification is essential.