Kuwait: Gulf currency not imminent

Single Gulf Currency

The Kuwaiti Finance Minister, Mustafa al-Shamali, has told parliament that more preparation time will be needed before the Gulf region is ready for a single currency.

Saudi Arabia, Kuwait, Bahrain and Qatar, members of the Gulf Cooperation Council (GCC), signed an agreement in the summer aimed at creating a joint monetary council that would later become the GCC central bank.

A single Gulf currency would facilitate trade in the region, hopefully leading to greater economic prosperity and greater equality of resources for GCC member states. Another primary objective is to lessen dependence on foreign economies such as the US, as the world looks to adjust to changes in the global geopolitical and economic landscape in the wake of the financial crisis.

But al-Shamali said this week that a unified currency for the Gulf states will not be happening "tomorrow or the day after", casting doubts over the plans to launch the currency early next year.

UAE and Oman withdrew from talks

However this is not the first time the proposed date has been branded unrealistic. Earlier this month the governor of the Saudi Arabian Monetary Agency, or central bank, Mohammad al-Jasser said the launch of the currency was set to be delayed.

A further obstacle to plans has been the choice of GCC members the UAE and Oman to abstain from the project, with the UAE citing they are not happy with the selection of Riyadh, the Saudi capital, as the location for the future GCC central bank.

It would seem that some confusion remains over the nature of the proposed currency after al-Shamali told the Kuwaiti parliament it may not necessarily be pegged to another currency.

Kuwait drop the US dollar

"It might be a currency or a basket of currencies. This issue will be discussed between the Gulf states."

This comes after Kuwait dropped the dollar in May 2007 in fears over soaring inflation, instead favouring a basket of currencies.

Further talks are to be held over the impact of a single currency in the Gulf, with GCC members meeting on 14 December. Because despite agreeing a number of technical criteria for the monetary union, many issues remain unresolved.

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