The UAE has no intention to re-enter the GCC monetary union at the moment, and is not in negotiations over this, says the Central Bank governor.
UAE monetary union withdrawal to stay
The UAE has no plan to re-enter the GCC monetary union and is not negotiating with other member states about the possibility of doing so, officials said yesterday. "No, we are not negotiating. For the time being, the position of the UAE is withdrawal," said Sultan al Suwaidi, the Governor of the Central Bank, on the sidelines of a Ministry of Labour presentation in Abu Dhabi. His comments were echoed by Sultan al Mansouri, the Minister of Economy, who said the UAE would not reconsider its decision to pull out of the currency union with other GCC states. The Government announced last week its intention to unilaterally withdraw from the GCC common currency project, based on its objections to locate a planned Gulf central bank in Riyadh instead of Abu Dhabi. Gulf monetary union was due to come into effect by the beginning of next year, but has suffered a series of setbacks, including Kuwait's decision in 2007 to de-peg from the dollar. Since the UAE's withdrawal, many economists now question whether the common currency project can progress as planned. Despite concerns over the future of monetary union, King Abdullah of Saudi Arabia yesterday indicated that the kingdom was taking steps to resolve its disagreements with the UAE over the location of the planned GCC central bank. "The coming review before the implementation would resolve what had been disputed upon," he was quoted as saying in the Kuwait-based newspaper, al Seyyasah. "The atmosphere for reviewing the monetary union agreement is open and the Emirates has an alert leadership." Dr Anwar Gargash, the Minister of State for Foreign Affairs, said diplomatic relations between the UAE and the other GCC countries remained strong, and there was no need to bring in outside mediators to help the UAE solve its disagreements over the location of a planned Gulf central bank. "Having different views on some issues is a normal matter," Dr Gargash said, according to Kuwait's official news agency. "The UAE views that the procedures followed to select the location were not right. Therefore it demanded, through an official memorandum, to halt discussions on the matter. The UAE opted not to raise the issue with brothers in order for them not to take a negative turn," he said. Mr al Suwaidi also indicated yesterday that liquidity within the UAE banking system was improving. Earlier this month, he said the funding gap had decreased from Dh110 billion (US$29.95bn) in March to Dh91bn. An increase in consumer and commercial deposits over the past few months, along with a general easing of the international funding shortage, had helped banks close the gap, he said. Mr al Suwaidi was satisfied with the UAE benchmark interest rate, although he said the Central Bank could still choose to change the rate in the future if market conditions worsened. "We have gone down to 1 per cent per annum for the discount rate at the Central Bank, and I think this is a good rate for the UAE." The Central Bank last cut its benchmark interest rate in January, from 1.5 per cent to 1 per cent. The US Fed Funds rate, which the Central Bank tracked until recently, stands at near zero after the Fed's most recent rate cut in December. Any change in the Central Bank's benchmark interest rates "depends on our circumstances, it depends on monetary policy, which the board decides", Mr al Suwaidi said. * with agencies firstname.lastname@example.org