MUSCAT // GCC states have reaffirmed their commitment to create a regional monetary union by 2010, but have left most of the thorny details to be worked out next year. They did not settle on a home for a monetary council - intended to be the precursor to a regional central bank - but said they would aim to make that decision in the first half of next year. Each state has until the end of next year to give its final approval.
Gulf leaders met on Monday and yesterday in Muscat for their annual summit, where deliberations over the monetary union had been slated for the top of the agenda. Although discussions were dominated by reaction to the Israeli attacks on Gaza, Gulf leaders remained under close scrutiny from outside observers to see if they could produce tangible progress towards monetary union. "The monetary union is approved for today," said Abdel Rahman al Attiyah, the secretary general of the GCC.
"The location will be discussed between now and the middle of the year to finalise the place of the headquarters of the monetary council, which will lead to the [GCC] central bank." Gulf leaders had also made no decision to push back the Jan 1 2010 deadline, Mr al Attiyah said. The new currency would be in circulation "according to the timetable, unless the monetary council decides something else. Otherwise, 2010," he said.
Economists said the decision provided a welcome sign of progress on the union, and that the financial crisis may have sped up the deliberations. "They are trying to make some decisions against a very volatile, deteriorating economic backdrop. I think that makes the case for monetary union more compelling, but it also makes it harder to achieve because there are more immediate issues on the agenda," said Simon Williams, the chief economist at HSBC in Dubai. The monetary union agreement, which is designed to eventually produce a single currency for five of the six Gulf states, is not the final step that must be taken by GCC states before a new currency enters circulation. The location of the monetary council, which was expected to be decided yesterday after GCC finance ministers failed to reach an agreement on the matter in September, must still be determined. According to Mr al Attiyah, no decisions have yet been made on the matter. The monetary union agreement must also still be ratified by the individual governments of the five participating GCC states before it can formally go into effect. Oman was originally part of the single currency project, but opted out in 2006. According to Mustafa al Shimali, the finance minister of Kuwait, GCC states will push to get the monetary union ratified and in place by Dec 12 next year. "We have discussed the final draft of the monetary union agreement, thus paving the way for [GCC leaders] signing it to see the light at a maximum date of Dec 12 2009," Mr al Shimali said yesterday, according to KUNA, the Kuwaiti state news agency. "From my perspective, [the GCC] has already taken too long on this," said Abdul Khaleq Abdullah, a professor of political science at UAE University. However, he described the decision to reaffirm the original 2010 deadline as "a big push to the final currency". email@example.com