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21 February 2024

UAE faces competition to host Gulf Central Bank

By Nadim Kawach

The UAE has been locked in a strong competition to host the proposed Gulf Central Bank (GCB) as other regional oil producers are pushing to house the headquarters of the nucleus of a landmark monetary union, Saudi Arabia's Finance Minister was quoted as saying yesterday.

The heads of state of the six-nation Gulf Co-operation Council (GCC), which is seeking to create the Middle East's first currency union, shelved a decision on the GCB headquarters after other members joined the UAE in demanding to host the institution, Ibrahim Al-Assaf told the Saudi Arabia's Al Riyadh newspaper.

Assaf said the GCC summit held in Oman just before the end of the year discussed the GCB and the GCC Monetary Authority (GMA) and decided to continue negotiations about the two crucial projects for the monetary union.

"These two important issues were among the topics discussed by the GCC leaders at their summit in Muscat… they decided to pursue discussions and consultations about them after more than one GCC country, including Saudi Arabia, expressed their desire to host the two institutions."

It was the first time that Saudi Arabia disclosed that it wants to be home to the planned GCB, which will be the pillar of the GCC monetary union as it will oversee common fiscal policies and the single currency.

Saudi economists said the Kingdom is pushing to host the GCB on the grounds it houses the GCC Secretariat in Riyadh and has the largest economic and financial system in the 28-year-old Gulf political, defence and economic alliance.

Bankers said Bahrain is also making similar demands given the fact that it has one of the largest and most liberal banking systems in the Middle East.

In recent statements, Central Bank Governor Sultan bin Nasser Al Suweidi said the UAE was the first GCC member to ask for hosting the GCB.

"It was not a decision but an offer from us to host the GCB, we were the first member state to make this offer," Suweidi said.

"Of course, there should be a GCB as part of the monetary union… we in the UAE would love to see this bank based here… it will be a very important regional institution and we would like to be its base."

Suweidi said the UAE possessed "all financial, economic and logistic capabilities" to host the GCB. "We hope our brothers in the GCC will take this into consideration and respond to our offer to host this bank."

The UAE is classified as the Middle East's financial and commercial hub and it has the second largest economy in the Arab World after Saudi Arabia. In 2007, it overtook Saudi Arabia in terms of imports of goods and bank assets.