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Gulf central banks create reserve to back single currency

posted on 19/09/2005: 701 views

Gulf central banks are creating a reserve to support their single currency that is on track to be launched by 2010, the UAE Central Bank Governor said yesterday. But although technical issues have been resolved, the six Gulf states have yet to resolve political issues, he said. "In order to support the unified Gulf currency, the central banks are creating a Monetary Authority Reserve. The reserve is going to be equivalent to four months of imports of each GCC country,” Sultan Bin Nasser Al Suwaidi, UAE Central Bank governor, told bankers.

"The GCC Monetary Union is proceeding as per plan for a unified currency launch in 2010. We have agreed on technical issues but political issues like which country should host the GCC Monetary Authority, the name of the currency, and the design for the currency are not yet resolved,” he said. Speaking at a gathering of bankers organised by The Bank of New York and CFA Emirates, Suwaidi reiterated that GCC countries are suited for a monetary union due to their common export item, oil and gas, and open labour markets.

"But we have some way to go……there are differences in regulations and policies and these point to challenges for GCC countries.” The GCC has agreed on technical issues such as the rate of inflation that each state shouldn't exceed, the short-term interest rates, government deficits and public debt. Suwaidi hinted at support for the dollar saying the dirham peg to the dollar is likely to continue given the importance of the greenback.

"It is a very important currency for two out of three measures - it is the currency for international trade, for international investments and the yield from the dollar is good. (The Gulf News)


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