His Highness Sheikh Mohammed bin Rashid Al Maktoum, Vice-President and Prime Minister of the UAE and Ruler of Dubai, has met with the committee assigned with studying the dirham’s peg to the dollar after it recommended the link should be maintained.
Speculation the UAE and some of its Gulf neighbours would sever their currencies’ tie to the ailing greenback has mounted as inflation surges across the world’s biggest oil-exporting region.
Sheikh Mohammed said earlier this month a committee was studying the nation’s dollar peg and would report its recommendations to the government by the year-end.
However, after yesterday’s meeting at Emirates Towers, the committee “recommended keeping the linking of the dirham to the US dollar without any change to the official exchange rate of the dirham,” UAE news agency Wam said. The agency gave no further details.
Inflation in the UAE hit a 19-year peak of 9.3 per cent in 2006 and probably accelerated to 10.9 per cent last year, according to an estimate by the National Bank of Abu Dhabi.
The US currency hit record lows against the euro and a basket of major currencies last month. Dollar pegs force Gulf governments to track US interest-rate cuts. While, Gulf economies are booming on a five-fold rise in oil prices since 2002.
The committee was studying “the benefits of staying with the peg or not”, Sheikh Mohammed told reporters on April 1.
Earlier this week, UAE Central Bank Governor Sultan bin Nasser Al Suwaidi said there were no plans to end the long-standing peg. And he said Gulf Arab states were pushing ahead with monetary union by 2010.
“There is no intention for the time being to unpeg our currencies from the US dollar because if you look at currencies worldwide, you will find that all of them keep fluctuating, rising and declining,” said Al Suwaidi.
“So the decline in the dollar is a temporary phenomenon and we should not build long-term decisions on short-term issues,” he told reporters, as previously reported in Emirates Business. (With input from Reuters)
Relations with Libya
His Highness Sheikh Mohammed bin Rashid Al Maktoum, Vice-President and Prime Minister of UAE and Ruler of Dubai, and Libyan leader Colonel Muammar Gaddafi have discussed issues of mutual concern, according to Libyan News Agency. In a telephone conversation with Gaddafi yesterday, Sheikh Mohammed reiterated the UAE’s keen interest in further bolstering relations and co-operation with the Arab country. (Wam)
No plans to depeg dirham from dollar