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Decision to select GCC central bank politically motivated

posted on 23/05/2009: 833 views

Central Bank Governor Sultan bin Nasser Al Suwaidi said the decision to select Riyadh to host the GCC central bank was politically motivated and did not take into consideration UAE's competitive advantages.

"The decision ignored the competitive advantages enjoyed by the UAE and its banking sector, including having the largest number of banks, largest assets and largest deposits in the region. Additionally, UAE contributes 50 percent of the GCC's international money transfer," Al Suwaidi said.

Al Suwaidi said in an interview with the Dubai TV's 'Gulf Economy' programme, aired last night that he was surprised by the decision to select Riyadh as a host the GCC central bank because the UAE was the first to apply.

"The location (of GCC central bank) was not the only reason for UAE pulling out of the GCC monetary union. There were also other reservations voiced by the UAE which were not considered." He pointed out that the UAE commented that the agreement marginalised the currency unit and lack of mechanism that guarantees smooth transition following evaluation.

"The second reservation was about the role of GCC monetary Council, which was limited to conducting studies. It was supposed to play a key role in monetary policy," added Al Suwaidi.

Other reservations made were about lack of unified inflation rating system and the provision relating to a four-month currency reserves for imports, which failed to differ between imports destined for re-export and the imports for consumption.

"Around 70 percent of UAE imports are meant for re-export, rendering the UAE the world's second largest hub for re-exports." Al Suwaidi said the UAE will not change its monetary policies following withdrawal from the GCC monetary union.

"Our monetary policy will continue to maintain openness. The Dirham will remain to be pegged to the US dollar," he added.

Meanwhile, Al Suwaidi said certificates of deposits, which reached Dh215 billion when speculation on Dirham was at its highest, dropped to Dh48 billion "which means, to our relief, that speculative money has disappeared from the UAE." – Emirates News Agency, WAM


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