The Gulf states hope to reach agreement on the principles of a monetary union next year and press ahead with preparations for a single currency along the lines the euro, the governor of Bahrain's Monetary Agency said in an interview released on Wednesday.
Rasheed Mohammed Al-Maraj told the Financial Times Deutschland in an interview to be published on Thursday but released in advance: "We are in the process of drawing up the convergence criteria. Our aim is to reach agreement on the details by 2006." As is the case in the euro area, countries wanting to join the single Gulf currency would have to fulfil certain economic conditions.
The six states of the Gulf Co-operation Council - Saudi-Arabia, Kuwait, the United Arab Emirates, Qatar, Oman and Bahrein - are hoping to have a single currency by 2010.
"Our economies have much in common," Al-Maraj told the FT Deutschland. "Trade in the region is on the increase. It makes sense to try and set up monetary union." Al-Maraj conceded, however, that there could be delays in setting up a single monetary authority. The states originally wanted to reach agreement on the structure of such an authority by 2007. But the Bahrain official expressed confidence that the overall timetable would remain in place. "I hope our target launch date of 2010 can be achieved," he said. The central banker said experiences of the euro area would be drawn on when drawing up the convergence criteria, with reference values laid down for debt, inflation and the public deficit. "We're going to ask the European Central Bank for support," Al-Maraj said.
The Gulf states were therefore watching closely how the 12-country eurozone tackled such issues as growth differentials and breaches of the budget rules, the central bank said. "We want to make sure that the same thing doesn't happen with us," he said.
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