Gulf monetary union well on track: Saudi
by mahmood on 21/11/09 at 1:10 pm
Saudi Arabian central bank governor Muhammad al-Jasser said that Gulf monetary union is “well on track” and he expects Kuwait’s parliament to ratify an accord that would establish a regional monetary council.
“We have four countries that have reached a strong conviction” to enter into the union, al-Jasser said in an interview with Bloomberg Television in Frankfurt. There is a “strong reason not only to go forward with monetary union but also that other countries will join at a later time.” The six-member GCC agreed in 2001 to create a European Union-style shared currency which would help them integrate their economies and pursue a monetary policy independent of the US. Oman pulled out of the project in 2007 and the UAE withdrew earlier this year after the Saudi capital Riyadh was selected as the location for the future central bank.
“European monetary integration wasn’t a painless process either,” al-Jasser said. “There is “tremendous support” for monetary union. Kuwait’s parliament on Tuesday delayed a vote to ratify the monetary council accord. Lawmakers said they needed more details on the impact of monetary union on the domestic economy and the dinar.
All the council’s members except Kuwait peg their currencies to the dollar and follow the US Federal Reserve in setting interest rates.
The central bank of Saudi Arabia, the world’s biggest oil producer, is “very comfortable” with the level of its interest rates, al-Jasser said.
Saudi Arabia has cut its reverse repurchase rate three times this year, taking it to the lowest level since Bloomberg data began in September 2007.
Asked if he expects the Saad Group and Ahmad Hamad Algosaibi & Bros Co to come to an agreement with their creditors by year-end, al-Jasser said “I sure hope so, I hope they will come to terms with their creditors.” The Saudi Arabian family businesses defaulted on payments and owe $2.9bn to banks in the UAE. The companies are involved in legal battles after both businesses defaulted on their Bahrain-based banking units.
Meantime, Oman Central Bank executive president Hamood Sangour al-Zadjali said his country plans to stick to its currency peg to the US dollar.
“We stick to the dollar as a peg for our currency,” he said, when asked if there were any plans to consider a link to a basket of currencies instead.
On Tuesday, Kuwait—which dropped its dollar peg in 2007 in favour of a currency basket which includes the greenback—said Gulf Arab countries will discuss pegging their planned single currency to a basket instead of the US dollar.
The peg issue is gaining momentum again as the dollar retreats and oil prices recover, helping economies in the world’s top oil exporting region emerge from a downturn. Al-Zadjali said Oman’s growth outlook was looking up, but prospects were largely tied to developments in oil prices, which have strengthened recently to trade between $75 and $80 a barrel over the last month.
“The oil price will stay around $70 to $80 (per barrel) over the next year, that’s our expectation, but it’s not a forecast,” he told reporters at the European Banking Congress.
“The economy is doing very well at the moment, we expect there will be positive growth this year and next year we are very optimistic that the economy will grow much better.”
Source: Gulf Times
