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Thu 9 Jun 2011 07:18 PM

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Oman cenbank concerned about US debt default risk

Gulf economies are substantially tied up with US financial developments, official says

Oman cenbank concerned about US debt default risk
The UAE central bank said last year it holds nearly all of its foreign exchange reserves in US dollars (Getty Images)

Any US debt default may briefly destabilise Gulf Arab foreign asset reserves, a senior official at Oman's central bank said on Wednesday.

"We are discussing it within the central bank," the official said on condition of anonymity.

"We are concerned about the [risk of] US default and it may briefly destabilise, not only Oman, but the Gulf reserves because our economies are substantially tied up with US financial developments," he said.

US Republican lawmakers are "playing with fire" by contemplating even a brief debt default as a means to force deeper government spending cuts, an adviser to China's central bank said on Wednesday.

Gulf states like Oman, which mostly peg their currencies to the US dollar, are major holders of Treasuries and other US assets, with oil - priced in dollars - their major source of revenue.

Central bank officials in Saudia Arabia, UAE, Kuwait and Qatar were not immediately available for comment. Bahrain's central bank declined comment.

UAE central bank governor Sultan Nasser Al Suweidi said last week Gulf Arab central banks still regard US Treasuries as a safe investment and there was no change in their policies.

Central banks in the Gulf, the world's top oil-exporting region, usually do not disclose a detailed composition of their foreign currency reserves.

The UAE central bank said last year it holds nearly all of its foreign exchange reserves in US dollars with only small amounts of other currencies such as the Japanese yen.

Will Fury 8 years ago

This posturing by certain lawmakers is just that, posturing. There will be no debt default.

Ali 8 years ago

Why do the Gulf oil-rich countries in the first place have their economies substantially tied up with US financial developments?? Why not have your own financial developments which are tied up with your oil revenues? Why not have your own one currency and sell your oil at that currency and have your own “OPEC” organization? Why not educating your people in order to transform your oil into massive industries where the gulf countries can depend on themselves and have a sustainable future in terms of security, prosperity, sovereignty, and independently? I wonder if AB will post this comment!

Jack 8 years ago

I agree