GCC close to meeting monetary union plan

Saudi Gazette

GCC close to meeting monetary union plan

17 June 2010

JEDDAH - At the end of 2009, all GCC countries, with the exception of UAE and Oman which disengaged from the plan, were within the fiscal convergence criteria needed for the regional monetary union, the Washington-based Institute of International Finance (IIF) said.

“Most of the technical and policy convergence criteria have been achieved. The GCC has largely unrestricted intraregional mobility of goods, labor, and capital,” IIF said.

“But little progress has been made in putting the institutional arrangements in place for a functioning single currency including harmonization of statistics, and the development of an efficient payments system. There is a need for the development of an appropriate monetary policy framework and a common system of payments and settlements, as well as the establishment of mechanisms for cross-border payments and liquidity transfers in the common currency. Also, there is a need to set up a common accounting framework and adequate budgetary procedures.”
All members were within the agreed inflation rate, except Saudi Arabia which recorded the highest inflation rate of around five percent last year although it was way below the peak rate of 9.9 percent registered in 2008.
The convergence plan stipulates that member countries’ inflationrate should not deviate more than two percentage points from the GCC average. Inflation was as low as 1.5 percent in the UAE last year. It was 4.9 percent in Qatar. – SG/Agencies