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09 June 2023

Monetary Union is behind schedule

By Nadim Kawach


Gulf Arab states are likely to push back a 2010 deadline for their planned currency union to ensure all monetary and economic requirements can be met before the launch, according to an official report.

Finance ministers from the six-nation Gulf Co-operation Council (GCC) told their heads of state at the annual summit in Doha that they need more time to study the plan before they set a new deadline, said the report, which included unpublished decisions taken during the December 3-4 meeting.

In turn, GCC leaders asked the ministers to work out a new plan to achieve those requirements and set a new date for the Monetary Union.

Emirates Business was shown a copy of the report, labelled “Classified Document” yesterday. It read: “The Ministers and the GCC Central Bank Governors will hold a series of meetings to evaluate the timetable for the Monetary Union and chalk out a detailed programme to accomplish all requirements and conditions for the Monetary Union… they are to present this programme to their heads of state at their next summit.

“According to summit resolutions, member states are to work for the achievement of all financial, monetary and economic criteria needed to fulfill the Monetary Union, which has been ratified by the heads of state.”

It gave no new deadline for the Monetary Union but GCC officials have hinted the move would have to be delayed by a couple of years.

Oman has already informed its GCC partners that it would not be able to join them on time, while other members have indicated the project would be delayed. Under their first agreement in Oman in 2003, GCC states agreed to set up a Monetary Union in 2010 and to work for fiscal and economic adjustment three years ahead of the project.

The agreement covered common standards for economic and fiscal performance in member countries, including a maximum level of the budget deficit, public debt, current account deficit, interest rates and inflation.

At their meeting in September last year, GCC Central Bank governors said the 2010 target was not realistic but added they would work towards an early deadline. UAE Central Bank Governor Sultan Al Suwaidi admitted that the currency union project could be behind schedule by more than five years.

In a recent study, the International Monetary Fund urged the six member states to improve economic policy co-ordination if they want to meet the 2010 deadline. “We might recommend that the GCC countries start working on the creation of an independent “Gulf Central Bank” that would be responsible for conducting monetary policy, with control over liquidity in all countries until the Union is launched,” the Washington-based IMF said.

GCC states launched their long-awaited common market at the beginning of this year and officials hope it would pave the way for a successful Monetary Union.