Gulf Arab states are still working to introduce a single currency by 2010 but this deadline has become tight and a delay is possible, Saudi Arabia’s central bank governor said on Sunday.
Speaking to Reuters, Hamad Saud al-Sayyari also said all options are open on what type of single currency the Gulf Corporation Council (GCC) will have and possibilities include one with a peg to the dollar or a currency basket.
The timeframe for introducing the GCC single currency looked uncertain after Oman, one of the six members, said in December it was pulling out of the 2010 deadline.
“We have to review the situation every time we meet. If we have to change our schedule, we will announce it. Things are working with the original target although it has become tight. We are working on the assumption that things will go forward on schedule,” al-Sayyari said in the Swiss city of Basel. When asked if the GCC was delaying the deadline, al-Sayyari said: “It’s a possibility … I prefer to proceed on schedule.”
On Oman, al-Sayyari said: “Yes we want them back … We are in the process of discussing. They said they are not ready at the current stage. But that doesn’t mean they left completely.”
“Maybe, if things go on schedule, they join us later. They said they are not ready at the current stage. For the GCC it’s important to have all of them in.”
The GCC groups Saudi Arabia, which accounts for 60% of the council’s GDP, Kuwait, the United Arab Emirates, Qatar, Oman and Bahrain.
Gulf central banks are meeting in April to discuss the GCC exchange rate regime.
Al-Sayyari said the GCC had yet to decide on a single currency and all options were open.
“We know that the dollar is the currency of all our exports, more so imports. It could be a currency basket, could be a dollar peg,” he said.
Al-Sayyari also said Saudi Arabia has had enough interest rate hikes for now although the central bank had to be vigilant on inflation.
“Inflation in December was higher. That is a pick-up and that is why we moved our monetary policy. We think it is enough [on interest rates],” he said.
“We have to be vigilant. I cannot say inflation is not a problem. It is also a problem in our region – neighbouring markets.” Al-Sayyari added that imported inflation accounted for less than 50% of the country’s inflation.
“[Imported inflation] accounts for some but not substantial,” he said.
Annual inflation in Saudi Arabia quickened to 2.9% in December from 2.8% in November, climbing to its highest level in at least five years as economic growth strained supply and drove up prices.
The Saudi central bank raised benchmark interest rates by 30 basis points in February to 5.50%, narrowing the gap with U.S. borrowing costs for the first time since a Gulf stock market crash early last year.
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