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Fri 5 Oct 2007 03:01 PM

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Indians face ruin as rupee soars against Gulf currencies

Value of Gulf currencies has slumped by 22% against the rupee over past five years.

The Rupee soared to a record high against the US dollar this week, heaping further misery on Indian expatriates working in the GCC.

Booming Gulf economies are built on hard working Indians that have flocked to Dubai, Doha and Abu Dhabi over the past decade.

These workers, usually men, toil away in order to send money and provide a better life for their families that very often remain at home in India.

But rising inflation in the Middle East, coupled with a collapsing value of Gulf currencies against the Rupee, is having a crippling effect on remittances to India.

At today's inter-bank exchange rate one UAE dirham will buy only 10.75 rupees. Five years ago, a dirham bought 13.2 rupees, a 22 percent decline in the value of the Gulf currency.

Despite rising inflation and the weakening dollar, Gulf central banks have refused to de-peg their currencies from the greenback.Interest rates must therefore remain in step with the US Federal Reserve, rather than being increased to reign in inflation.

Evidence that Indians are feeling the squeeze came this year when it was announced that an ongoing amnesty allowing illegal immigrants to leave the UAE is expected to see almost 350,000 - 8 percent of the country's population - head for the airport.

The majority of illegal workers originate from the Subcontinent.

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