Single currency

Last month, to the overwhelming indifference of Generation Y-ers everywhere, it was announced that the word 'meh' was to be included in the latest edition of the Collins English Dictionary.

And the adjective - meaning apathetic, and made popular by the internet and an episode of The Simpsons - was thrust straight into action last week when further details of the proposed Gulf monetary union agreement were revealed.

The unified monetary authority cannot be established until the five countries taking part have all ratified the agreement, but as finance and foreign ministers met last week to hammer out the final details of a statement to be signed by their leaders in December, it looks as though some parts of the framework are slotting into place.

As ever, timing is everything, and we're all waiting to hear a specific date when the monetary union might actually become a reality. While officials are sticking to their guns, does anyone still believe that the Gulf single currency will become the sole legal tender of Saudi, Kuwait, Bahrain, Qatar and the UAE by the end of next year?

The years of difficulties, delays and doublespeak suggest that there is more chance of Bahrain winning the football World Cup in 2010, than there is of you or I being asked to settle a bill in khaleeji, or whatever Gulf leaders elect to name the currency.

Since the first steps were taken back in 2001, it has been a long march for policymakers committed to GCC monetary union, and the end is not yet in sight. Oman has already left the project and will not commit to the currency from the outset, while Kuwait threw the plan into doubt when it dropped its dollar peg.

And despite the global economic downturn and the resultant slowing of price inflation, there's still the issue of convergence criteria that stipulate runaway rates be brought under control.

Is the long wait really a serious blow to the Gulf's emerging economies? As a report by ratings agency Moody's noted last week, many of the common advantages of a currency union - such as the removal of internal currency risk, and the potential boost to intra-union trade - will be muted in the Gulf.

Given the GCC countries' generally strong balance of payments, sizeable external assets and long history of exchange rate stability, smaller Gulf states are not set to benefit in the same way that smaller Eurozone countries did upon their currency union.

At the same time, the disadvantages - members' loss of independent monetary and exchange rate policies - are also less applicable when five of the four prospective members are already pegged to the dollar.

So while it's admirable that ministers are working harder than ever to unify GCC monetary policy and bring price stability to the single currency area, there's no need to panic if we miss our oh-so-optimistic deadline. Will we be consuming in khaleeji in 2010? Meh.

Andrew White is the deputy editor of Arabian Business English.

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