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The revaluation of Gulf Cooperation Council (GCC) currencies against the dollar has been often discussed in the past few months, especially with the sharp drop in the dollar exchange rate, to which five out of the six GCC currencies are linked.
There have been conflicting and mysterious statements about revaluation, especially from the governors of GCC central banks.
These conflicting statements were issued almost one after the other, as if the issue was merely a lottery or a used car auction, not the monetary policy that affects the economy and finance of these countries.
Brokers and money exchanges made the most of these statements to increase their profits through speculation. Although this speculation reached alarming levels, the authorities in charge of controlling banks and money exchanges did not take any action, which means this speculation is still taking place in all GCC countries, and is negatively affecting travel, tourism and money exchange transactions.
It is not known whether central banks are aware of the negative effects of this trend on the financial and monetary situations in GCC countries.
Financial and monetary transactions are very sensitive to fluctuations and severely affected by speculation, but central banks can control transactions through their control departments, and this is one of their most basic tasks.
For example, a state advisor in Qatar said three weeks ago that the country is studying linking its currency to a currency basket or raising its value against the dollar to combat rising inflation.
This raised speculation on the Qatari riyal for a few hours, before a statement from another official totally denied the first one.
However, some central bank governors issue contradicting statements within the same week, which causes sharp fluctuations in their local currencies and raises questions about the reality.
There is a logical fact, which is that any GCC country cannot single-handedly delink its currency from the dollar without coordinating with the other countries. The results of this step and the effects it may have on financial and monetary situations are unpredictable.
The other fact is that more than 25 years of pegging GCC currencies to the dollar and pricing oil in the greenback does not give any GCC country the flexibility to take a unilateral step in this direction.
Following the last GCC Summit in Doha, there were reports about an agreement by the countries, excluding Kuwait, to coordinate their actions.
In this case, anything said about depegging GCC currencies from the dollar or revaluing them is unfounded. Thus, central banks, and especially their bank and money exchange controlling departments, must monitor transactions and exchange rates, which is a very simple task.
Any money exchange transactions must have official receipts, which clearly show the exchange rates. This makes it easy to monitor these transactions and protect the financial and monetary market from risky speculation.
Central banks must practice their professional and controlling roles rather than issue inconsistent statements, especially given the gloomy financial situation globally.
If statements must be given, they should be coordinated and studied carefully to put the minds of the public and the business sector at ease.
This may include issuing a joint statement by the general secretariat of the GCC for all countries, especially since these reassuring gestures reflect the truth of the good economic situation and constant development in GCC countries.
The writer is a UAE economic expert.
There have been conflicting statements about revaluation, especially from governors of GCC central banks.
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