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Abu Dhabi: The escalating inflation rates across the Gulf Cooperation Council (GCC) countries could delay the GCC single currency plans beyond 2010, a top official said on Sunday.
Governors of the GCC Central Banks will meet in Doha today to discuss the developments related to the currency union and the difficulties posed by the external factors including exchange rates and imported inflation, as well as other issues such as the establishment of the GCC Monetary Authority and the progress of the common market.
"The single currency will always be a strategic objective for the GCC countries, yet the timeframe depends on the recent circumstances and developments where we find structural changes, in addition to the growing inflation," Sultan Bin Nasser Al Suwaidi, the governor of the UAE Central Bank said yesterday.
"High inflation rates were never a concern before, and although it is a temporary phenomenon yet now it is indeed the factor behind the differences in opinion at this stage, and it can defer the issuance of the single currency beyond 2010, where sometimes side issues can distract attention from the main target," he revealed.
The deadline decided to issue the GCC single currency by 2010 is now influenced by the dynamics of external factors including imported inflation which is reflected in the country's economic progress, according to the governor.
"The single currency must be launched, and we will work in coordination with other GCC countries to ensure that no country takes any step without appropriate consultations with the rest," Al Suwaidi said explaining that the GCC countries are "currently working on rearranging priorities according to the new circumstances".
The US dollar can depreciate further if the European and British Central Banks seek higher interest rates to curb the rising inflation in the Europe, yet the Central Bank's governor explained that he is not concerned with this as the US Federal Reserve is under similar inflationary pressures and can resort to raising rates as well.
"I personally think that the Feds will also change course towards increasing interest rates due to the growing inflationary pressures in the US economy, and this will offset any rates hikes in the Europe," he said.
Al Suwaidi agreed with the announcements made by Henry M. Paulson, US Secretary of the Treasury, that the US dollar will remain the currency of choice in the sovereign foreign exchange reserves.
The Central Bank is also working on the proposal to lift the ceiling on personal loans up to twenty five times the monthly income or salary.
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