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Wed 27 Jan 2010 01:34 AM

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Poll sees Gulf states adopting single currency by 2015

UAE to deal with domestic issues before reconsidering joining single currency plan.

Gulf states are likely to adopt a single currency in 2015 but the UAE is unlikely to reconsider joining the planned Gulf monetary union this year, a Reuters poll forecast on Tuesday.

Gulf rulers last month endorsed a much delayed plan for monetary union, despite the absence of the UAE, the bloc's second biggest economy after Saudi Arabia and Oman.

The poll showed five economists betting on 2015 as the launch date for a Gulf common currency.

One said between 2014 and 2015 was likely, while another two respondents forecast it would not happen until 2017 and 2020 respectively given a number of technical issues still to be resolved.

The UAE withdrew from the project last May in protest at a decision to house the joint monetary council, which will prepare the launch of a common central bank, in the Saudi capital Riyadh.

Seven out of 10 economists polled said the UAE was unlikely this year to reconsider joining monetary union, and three economists said it was very unlikely to reconsider.

Daniel Kaye, senior economist, National Bank of Kuwait, said: "Eventually if the project will go ahead they (the UAE) will reconsider but I don't see this happening in the short term."

He added: "The UAE has enough domestic issues to deal with at the moment so I don't see an immediate horizon, I don't see a change of heart."

The UAE, the world's third largest oil exporter, has more pressing priorities as it restructures a multi billion dollar debt pile owed by Dubai's flagship companies, which is expected to dampen its economic growth prospects this year.

Kuwait aims to bring both the UAE and Oman back to the project during its 2010 presidency of the Gulf Cooperation Council (GCC), a loose political and economic bloc that seeks to emulate the European Union's economic and monetary integration.

Only four out of six GCC members - Saudi Arabia, Kuwait, Qatar and Bahrain - may now go ahead with the project.

Oman, which withdrew in 2006, said earlier this month that it had no plans to review its decision to withdraw now or in the future.

Striking a power balance in the union remains a challenge as some smaller Gulf states resist the dominance of Saudi Arabia, the largest Arab economy and the world's biggest oil exporter.

The GCC bloc abandoned last year an initial deadline for issuing common notes and coins in 2010, saying a joint monetary council would determine a new timetable for their issuance.

Policymakers from the four remaining states are expected to set a timetable for the creation of a joint central bank, but launching the single currency is a distant prospect.

Farah Ahmed Hersi, senior economist, Masraf Al Rayan, Doha, said: "Kuwait has also one foot in the door and another one out and the process will take longer than we thought at the beginning."

Kuwait's lawmakers delayed ratification of the project last year and demanded another vote ahead of the single currency launch, although analysts have said it did not necessarily indicate a lack of commitment.

Kuwait is the only GCC country which pegs its currency to a basket of currencies rather than just the dollar.

A senior official from the bloc's secretariat said earlier this month that a single Gulf currency could be launched in 2015 if countries from the GCC speed up the process. (Reuters)

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