'Time is short' on a 2010 monetary union as Oman confirms it is out following Kuwait's move to drop the dollar peg.
Oman will definitely not join the planned single currency by 2010, the governor of its central bank said yesterday.
Homud Al-Zidjali told a banking conference in Kuwait that meeting the criteria required to join the single currency could have a negative impact on the country's development.
"Our decision is not to participate in the Gulf monetary union... because we do not want to restrict our monetary and fiscal policies at present," Al-Zidjali told a banking conference in Kuwait.
Al-Zidjali's comments come just days after Kuwait dropped the dinar's dollar peg to control rising inflation caused by the dollar's decline in value.
Kuwait first adopted the dollar peg in anticipation of the proposed GCC monetary union.
The news casts further doubt as to whether the monetary union and single currency will launch by the 2010 deadline, with the head of the Saudi Arabian Monetary Agency admitting yesterday time was running out.
"It is true that the time now is short and we need exceptional efforts to achieve [monetary union and single currency by 2010]," Hamad Al-Sayari said at the conference.
Al-Zidjali did not rule out Oman joining the currency at a later date, but said this was unlikely until after it comes into existence.
"At present we will not join. Later when the single currency comes into existence, then maybe," he said.
Oman has previously warned GCC members that it would not be able to meet the required legislative and technical conditions for monetary union membership before 2010.
Analysts have said it is increasingly unlikely the GCC will meet the target date for launching the currency.
"They made clear previously that they didn't believe they would be ready to meet the single currency criteria in 2010 and yesterday's comments are a restatement of that view," said Simon Williams, an economist working for HSBC.
"I think there are a whole host of obstacles for the GCC to overcome - and overcome quickly - if the single currency is to come into effect at the start of 2010. I think the likelihood is that the deadline won't be met," he added.
Kuwait's move earlier in the week to unshackle itself from the dollar has raised speculation that other Gulf countries will follow suit.
Both Qatar and the UAE have come out in support of the dollar peg, but today the UAE central bank governor said changing the dollar peg had not been discussed by the Gulf states since Kuwait's decision to drop its dollar peg.
"At the collective level, the question has not been posed," said Sultan Nasser Al-Suweidi.
"If the Gulf states decide to adopt a reference basket, the exchange currency would be another thing," he added.