The Gulf states' target to achieve monetary union by 2010 could be pushed beyond 2015 because the member countries have not yet achieved the dynamics of a common currency market, Sultan Nasser Al Suwaidi, the UAE Central Bank Governor said in a recent interview with .commerce magazine. The Gulf central bank governors, who met in Saudi Arabia in early September, announced that the 2010 target is not realistic, but said that they would work towards an early deadline.
Suwaidi's statement is the first by a Gulf central bank governor that has admitted that the currency union project could be behind schedule by more than five years.
The UAE Central Bank governor said that the GCC states are behind in achieving common currency parameters such as free flow of capital and people across borders, compatible laws in land and property ownership and tax laws. "Allowing corporations to establish branches, expand their businesses, buy and hold property and flows of people, these are beyond the control of central banks," he said.
Cracks in GCC monetary union plan began to appear from the beginning of this year. The 2010 target came under a cloud last May when the Central Bank of Oman admitted that the country was not ready for the union.
Ambitious
Earlier this year Mohsin S. Khan, Director of the Middle East and Central Asia Department of the International Monetary Fund, told Gulf News that the 2010 monetary union target was too ambitious.
"The IMF has no doubt about the commitment of GCC central banks and political establishments to the common currency. However, the whole process of establishing systems and processes in achieving monetary union is very time consuming," he said.
Suwaidi's views on the currency union are significant in the context that following the Riyadh meeting, the GCC central bank governors had decided to meet in October to re-assess the currency union.
Meanwhile, the UAE Central Bank governor said monetary policy has very little to do with inflation control in the UAE.
"Inflation is here because of shortages of housing units and office space and with that everything is affected," he said. According to him it is fiscal policy that matters most. "I think it is fiscal policy planning, expenditure by the government that has to be phased in a way that will have housing units before you have the influx of people who will do the developmental projects," he said.
Via: GulfNews
