GCC inflation may delay monetary union

A common currency for the GCC may still have to be put on hold due to surging inflation in the region. Discussions are being held by the six member states to address the issue. (MUSTAFA KASMI)

The GCC countries may not be able to launch a single currency by 2010 as planned because of difficulties caused by inflation, the Governor of the UAE's Central Bank said yesterday.

But Sultan Nasser Al Suwaidi said discussions on the subject were continuing between the six member states. "Inflation is a worrying thing but it is temporary," the Central Bank governor told reporters at a meeting of the Permanent Committee of Central Bank Governors' Council in the UAE capital. "Therefore there is a rearrangement of priorities," he added.

Al Suwaidi said the Central Bank and the Ministry of Finance were co-operating to set up a credit authority, adding that consultations were under way with banks to increase the ceiling of loans to 25 times of salary of a loan seeker. The bank would send its recommendations to the Cabinet.

Al Suwaidi said he agreed with the view expressed by US Treasury Secretary Henry Paulson at a meeting with the US-UAE Business Council that the dollar would continue to be the world's reserve currency.

And he predicted that the Federal Reserve would raise interest rates in the near future because of the rise in US inflation. Meanwhile, Dr Jassem Al Mannai, director-general and chairman of the Arab Monetary Fund, told reporters Iraq would soon rejoin the fund.