The UAE should drop its dirham currency's peg to the dollar to help fight soaring inflation, the chief executive of a Saudi Arabian real estate firm said.
Abdulraman Al-Tassan, chief executive of Rakaa Properties, is the latest business leader to call on the second-largest Arab economy to sever its link to the dollar as it tackles inflation which hit a 19-year peak of 9.3% in 2006.
"The long-awaited decision on whether to de-peg the GCC currencies from the dollar is one possible effective solution" to combat inflation, Al-Tassan said in a statement issued on Wednesday on the impact of a regional real estate boom on inflation.
Rakaa Properties, the real estate arm of Riyadh-based conglomerate Rakaa Holding, is developing a $272 million project on Abu Dhabi's Reem Island.
UAE business leaders - including Khalaf Al-Habtoor, chairman of conglomerate Al-Habtoor Group, and Dubai Properties Chief Executive Mohammed Binbrek - made calls for an end to the dollar peg in December in a report in the daily Emirates Business 24/7.
Surging inflation in the Gulf has fuelled speculation that some countries may either revalue their currencies or drop their pegs to the dollar, which hit a record low against the euro on Wednesday.
UAE inflation probably accelerated to 10.9% last year on surging rents, National Bank of Abu Dhabi (NBAD) said this week.
"Al-Tassan agreed with the call to de-peg the dirham from the dollar," the Rakaa statement said.
Inflation had "undermined the competitiveness of Gulf countries for residents who are beginning to rethink the feasibility of remaining", it said.
UAE Central Bank Governor Sultan Nasser Al-Suweidi called for currency reform in November after South Asian construction workers rioted in Dubai over savings lost to dollar weakness. Al-Suweidi has since backtracked on those remarks.
Dollar pegs force Gulf states to track US interest rate cuts even though their economies are surging on a near five-fold jump in oil prices since 2002. (Reuters)
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