Gulf Arab states agreed on Sunday on fresh impetus for efforts to create a single currency by 2010 and resist pressure to revalue currencies or drop their dollar pegs unilaterally to offset soaring inflation.
Central bank governors from the six-member Gulf Cooperation Council (GCC) will meet again in two months to "complete the legislation and the matters relating to monetary union as we march to reach 2010," GCC Secretary-General Abdul-Rahman al-Attiyah said after a meeting of the governors in the Qatari capital, Doha.
The governors' regular twice-yearly meeting on Sunday discussed removing obstacles to the single currency plans. Of the six countries, Oman said in 2006 it would not join by a January 1, 2010 target and Kuwait dropped its dollar peg in May, throwing the plan into disarray.
The GCC comprises Saudi Arabia, the United Arab Emirates, Kuwait, Qatar, Oman and Bahrain. Qatar holds the revolving chair. "We are going to review the date in 2009," Qatari Central Bank Governor Sheikh Abdullah bin Saud al-Thani told reporters at the end of the meeting. Of the 2010 target, he said: "It is realistic. We are committed to working towards that target."
The comments contrast with statements last year which indicated the monetary union project would probably be delayed several years as the economies of the region diverged, particularly on inflation.
"They are trying to take speculation away from GCC currency-reform talk after last year, when so many comments were made that increased speculation," said Monica Malik, Middle East economist for Cairo-based investment bank EFG-Hermes.
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Qatar's Sheikh Abdullah said the six countries will have to work more closely together to resist going their separate ways on currency policy as interest rates fall and the US dollar weakens.
The dollar has lost almost 8 percent of its value against the euro this year alone, helping fuel record or near-record Gulf inflation by making some imports more expensive.
Saudi Arabia, the UAE and Qatar are among the oil producers that have come under pressure to revalue their currencies or drop their pegs as the link forces them to track declining US interest rates when their own economies are surging. Oil prices have surged five-fold during the last six years.
"We meet today against the backdrop of very difficult and complicated developments, in terms of their impact on our economic conditions in general, and fiscal and monetary in particular," Sheikh Abdullah said earlier on Sunday.
"The pressure on our economies has piled up in the last year, be it in terms of interest rates or exchange rates," he said. "These pressures appear to be likely to continue over the current year in a manner that requires us to deal with them with the greatest level of coordination and consultation."
This is "so that these developments do not push us away from our common aspirations and our march that leads to the achievement of monetary union," he said.
Several Gulf states are determined to meet the 2010 deadline, GCC Secretary-General Attiyah said earlier on Sunday, without identifying them. Others could follow later, he said.
UAE inflation hit a 19-year high of 9.3 percent in 2006 and probably accelerated to more than 10 percent last year. In Qatar, the world's largest exporter of liquefied natural gas, it was 13.7 percent in the fourth quarter.
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