Establishment of common GCC monetary council likely this year
An agreement to establish a common GCC monetary council by the end of 2006 will likely be endorsed by the GCC General Secretariat. Such a council will eventually be converted to a Gulf central bank, a precursor to the endorsement of a common currency to be named and launched by 2008.
Establishing a common GCC currency, according to Dr. Nasser Al Kaud, Minister Plenipotentiary and Director of the Finance and Monetary Integration Administration at the GCC General Secretariat, would boost the ability of companies in the GCC to merge or purchase other companies.
"Dealing in one GCC currency will end the risks related to exchange rates and help develop the Gulf money markets in size and volume, especially bonds," Dr. Al Kaud said, according to <i>Gulf News</i>.
He added that the common GCC monetary authority would also reconsider the 2000 decision of the Supreme Council's decision in Bahrain to link the currency to the US dollar.
"The GCC central bank will have the freedom to select linking the currency to one or more currencies, or to float it, according to the requirements of the coming stage," he said.
"The committee of governors at the council last year discussed the standards of economic rapprochement concerning financial and monetary stability, which is required to make GCC monetary union a success."
Adding, "It was agreed that GCC countries endorse an inflation rate of not more than 2 percent, interest rates of not more than 2 points, and that budget deficits must not exceed 3 percent, and public debt must not exceed 60 percent of the total debt of the country."