Riyadh meet to finalise financial infrastructure, setting up central bank

Kuwait City: A timetable for when a single Gulf currency will be launched as well as a decision on which currency, or basket of currencies it will be pegged to, will be made at a meeting in Riyadh on March 30, Kuwait's central bank governor said Wednesday.

At the March 30 meeting "plans will be designed and a time frame finalised for the financial infrastructure required to launch a single currency and for the [establishment] of the Gulf central bank," Shaikh Salem Abdul Aziz Al Sabah told reporters at a press conference.

When asked if the Gulf single currency could be pegged to the US dollar, Al Sabah said "I don't know."

Saudi Arabia's central bank governor said in March 2009 that the single currency could initially be pegged to the dollar and then allowed to float.
Saudi Arabia, Kuwait, Qatar and Bahrain are forging ahead with plans for a monetary union after the UAE and Oman opted out of the plans.
The UAE dropped out last year after it was decided that the union's central bank will be based in Riyadh, the Saudi capital.

Economists argue that the Gulf monetary union needs to establish monetary independence for member states, all of which are pegged to the US dollar, except Kuwait. But Kuwait is pegged to a basket of currencies in which the dollar is expected to dominate. The peg forces Gulf countries to mimic US Federal Reserve actions, such as interest rate cuts, despite having a very different economic and inflationary environment to the US.

"The GCC should gain monetary independence," said Philippe Dauba-Pantanacce, Standard Chartered Bank's senior economist for the Middle East and North Africa.

UAE won't join union
UAE Central Bank Governor Sultan Bin Nasser Al Suwaidi said there are currently no talks aimed at bringing his country to rejoin the Gulf monetary union.