Dubai: As per the reports the four Gulf Cooperation Council (GCC) countries have decided to announce the introduction of a common currency by the end of December. The common currency will be announced by Bahrain, Kuwait, Qatar and Saudi Arabia.
All the four curries will be pegged with the dollar, although it would have been better to peg the new currency to a basket of currencies because the volume of trade of the Gulf States with the countries of the European Union is much larger than that of their commerce with the United States. Thus it is also speculated that the decision to peg the Gulf currency to the dollar is political and is not related to the economy.
Sources reveal that Oman and the UAE, the other two members of the six-country Gulf council set up in 1981, are not likely to join the common currency in the near future.
The GCC countries have been discussing a currency union similar to the Eurozone for more than 15 years. Several economists in the Gulf have been calling for dropping the GCC countries’ long-entrenched peg to the dollar and consider moving to a more flexible exchange rate that will help them better face highly possible inflation risks and economic crises.
In September, an official of the European Central Bank (ECB) said that the GCC should not introduce a common currency before its members have a clear common objective.
Although the Yves Mersch, an executive board member of the ECB, reportedly said at a global financial summit that no union of states would be ready for a common currency if there was no political consensus.