Sunday, October 04, 2009
GCC nations to hold poll for naming new currency
Four Gulf oil producers are planning to conduct an opinion poll on the name of the new currency that will form the backbone of a landmark monetary union which they could launch next year, a Saudi Arabian newspaper reported yesterday.
While there is a tendency by Saudi Arabia, Bahrain, Kuwait and Qatar to name the new currency the Gulf dinar, the four nations will still push ahead with a referendum-like survey before they decide its name, the Riyadh-based Aleqtisadiah newspaper reported, quoting sources close to the monetary union.
The paper said a joint commission set up by the four countries to oversee the pre-union arrangements had rejected 14 proposals on the name of the single currency on the grounds they want a "familiar name"."As a result, there is a general tendency now to name the currency either dinar or riyal, which are two common names of currency in the region… but according to observers, the dinar is a stronger candidate because the founders want a name of a currency which is psychologically associated with the minds of the citizens as a strong and high value currency," the paper said.
"According to the sources, the planned GCC Monetary Council which is preparing to set up a common central bank in Riyadh is expected to conduct a survey dealing with the psychology of the Gulf citizens on their favourite name of the new currency.
Once the name of the currency is determined, the proposal will be presented to the heads of state for final endorsement."Saudi Arabia and its three partners in the GCC have not yet decided on the form of the new currency for their monetary union as the task will be that of the planned Gulf Central Bank.
The legislative bodies of Saudi Arabia and Bahrain have signed the monetary union pact, which will be enforced a month after it was ratified by all members. The UAE last week said it pulled out of the region's first monetary union to allow the other members to go ahead with it, while Oman said its withdrawal was final.
The four founders of monetary union have already sought help from the International Monetary Fund on a possible revaluation of their currencies ahead of the creation of the currency union, initially scheduled for 2010.
In a working paper released this month, the IMF suggested slight appreciation of the currencies of the four Gulf nations against the US dollar but it warned any leakage of news ahead of the revaluation could spur damaging speculation.
"This research paper developed from an informal request to one of the authors by a member of the GCC Secretariat for guidance on how to set the conversion values for the new GCC currency," the IMF said.It said such a methodology could also be useful for the UAE and Oman in case they decide to join the monetary union at a later stage."
If hypothetically the GCC decides to establish the new currency in its original planned date, 2010, Saudi Arabia would need to revalue its currency by 2.94 per cent vis-à-vis the US dollar, Kuwait by 5.15 per cent, Qatar by 4.54 per cent, and Bahrain by 1.09 per cent.
The methodology of revaluation provides an estimate of the required adjustment for each currency if the conversion is to take place in 2011, 2012, or 2013," the working paper said.Union on trackGulf nations are "on track" to create a shared currency and will set up a monetary council, a precursor to a joint central bank, by 2010, said Saudi central bank Governor Muhammad Al Jasser said.
The countries involved have done a "lot of work" on technical convergence criteria, Al Jasser said in Istanbul, Turkey, where he is attending the annual meetings of the International Monetary Fund and the World Bank.
