Gulf finance ministers agree on monetary union proposals

Business Materials 18 September 2008 02:51 (UTC +04:00)

Gulf Cooperation Council (GCC) finance ministers on Wednesday approved proposals to set up a monetary union, but the timing of the launch of a single currency was not revealed, reported dpa.

"We have an agreement to set up the monetary union and the monetary council, as well as the basic structure," Qatari Finance Minister Youssef Kamal, who chaired the meeting of GCC countries in the Western Saudi city of Jeddah, told reporters.

"We asked the heads of central banks to complete the requirements for the single currency in future meetings," Kamal said after the meeting, which took place amid doubts over the independence of a future common central bank with the decision over its location postponed until a November summit of the six GCC heads of state.

Kamal refused to declare a certain date for launching the single currency, only replying, "I don't know."

The decisions taken Wednesday must be approved by the heads of state before they come in force for the GCC, which groups Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates.

In 2001, GCC members agreed to form a European Union-style monetary union by 2010 to boost regional trade.

Most Gulf states have their currencies pegged to the dollar, forcing them to track US rate cuts. Oman pulled out last year, while Kuwait abandoned the greenback and moved to a currency basket.

While the GCC ministers insisted that their economies were not severely affected by the lingering US financial crisis, International Monetary Fund (IMF) Director General Dominique Strauss-Kahn, who joined Wednesday's meeting, said that the worst of the financial crisis may still lie ahead and could weigh on the world economy.

The GCC finance ministers' decision comes one day after the US offered an 85-billion-dollar loan to rescue the insurance giant American International Group (AIG), and two days after investment bank Lehman Brothers announced its bankruptcy.