GCC moves closer to common currency

Published January 4th, 2010 - 02:15 GMT

In a step toward a common Gulf Cooperation Council (GCC) currency, the central banks of Saudi Arabia, Kuwait, Bahrain and Qatar have stopped lending to the public sector, Qatar's Peninsula reports. According to the draft GCC common monetary union agreement, the four GCC central banks can no longer lend to public sector entities. The banks must also sell off their public sector loan portfolios.  Once these loan portfolios are sold, a regional central bank can be established along the European model. Like the European Central Bank, the GCC monetary union will not lend to state-owned agencies.

Oman and the UAE have not agreed to plans for a common currency plan, but regional analysts have said the two may join the union if a common currency proves as successful as the Euro.

The next concern facing the proposed monetary union is whether the currency will be pegged to the dollar or to a basket of international currencies.

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