Gulf States sign monetary pact

The ceremony saw the participation of foreign and finance ministers, Central Bank governors of GCC in Riyadh. Such a decision is a confidence-building measure, following the sudden decision taken by the UAE, to withdraw from the plan.

In doing so, the UAE withdrew itself from the group, which stirred doubts of whether the project would proceed, and if so, whether the new currency would be of any benefit to the energy-exporting region.

“For the skeptics, the deal is not that important. However, it should be seen as another step ahead, and serves as a proof to those who say that the union cannot move ahead,” commented John Sfakianakis, Chief Economist, HSBC Saudi affiliate.

Before UAE’s withdrawal from the group, Oman had already opted out in 2006, and earlier this year, the GCC abandoned an initial 2010 deadline for issuing common notes and coins.

The foreign minister of UAE last month said that the Gulf state would consider re-joining the union if few amendments are made to the terms, and if its neighbours permit for a joint central bank to be based in the UAE.

However, the Saudi Finance Minister, Ibrahim Al Assaf, confirmed that Gulf Central Bank will not be open for re-negotiation.

The six GCC members, in 2001, had agreed to forge a monetary union, similar to that of European union.

Posted on 8/6/2009

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