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12-30-2009, 12:06 PM
http://gulfnews.com/business/banking/gulf-closer-to-currency-union-pact-1.558336


Gulf closer to currency union pact

The four states that ratified the GCC Monetary Union pact will soon start implementing the provisions of the pact
http://gulfnews.com/polopoly_fs/uae-president-his-highness-shaikh-khalifa-bin-zayed-al-nahyan-bahrain-s-king-hamad-1.554161%21image/1136103892.jpg_gen/derivatives/box_475/1136103892.jpg

UAE President His Highness Shaikh Khalifa Bin Zayed Al Nahyan, Bahrain's King Hamad Bin Eisa Al Khalifa and GCC Secretary-General Abdul Rahman Al Attiyah at the summit. Shaikh Maktoum Bin Mohammad Bin Rashid Al Maktoum, Deputy Ruler of Dubai; Lieutenant General Shaikh Saif Bin Zayed Al Nahyan, Deputy Prime Minister and Minister of Interior, and Shaikh Mansour Bin Zayed Al Nahyan, Deputy Prime Minister and Minister of Presidential Affairs, are also shown.
Image Credit: WAM


Riyadh: The four states of the Gulf Cooperation Council (GCC) that have ratified the GCC Monetary Union pact at the annual summit held recently in Kuwait will soon start implementing the provisions of the pact.
Saudi Arabia, Bahrain, Kuwait and Qatar have signed and ratified the pact while the other two members the UAE and Oman and have opted out of the union.
The central banks of the four states will stop extending loans to public sector undertakings in their respective countries this week onwards as part of the pact, according to sources. These central banks will also begin exchanging basic information.
Achievement
The GCC Monetary Union pact, which came into effect on December 15, was a major achievement of the Kuwait summit that would bring the GCC states closer toward a single currency.
Accordingly, GCC central bank governors will work out a timetable for the establishment of the Gulf central bank to ultimately launch the single currency.
Under the pact, a Gulf Monetary Council, to be established early next year, would develop into a central bank which would then take the required measures to issue a single currency.
Under the pact, the central banks will clear all the loans given to the public firms prior to issuance of the single currency. It also forbids central banks from direct purchasing of bonds or other means of debt, issued by the public undertakings.
However, the central bank and the national banks can buy the bonds from a second market, and that is in the framework of executing open market operations, Al Eqtisadia business daily reported quoting the sources.
The Gulf Monetary Council, which will be established early next year, will strive to enhance cooperation and coordination among the GCC central banks to facilitate the appropriate situation for the monetary union.
Framework
The council will also work on framing the legal, organisational and logistic framework to establish the GCC Central Bank. All the modalities for the functioning of the central bank, including issuance of the single currency and its salient features, will be worked out, sources said.
According to sources, the Monetary Council will comprise only the central banks from GCC states.
"It is not allowed either for the council or any one of its board directors to entertain any directives or guidelines from any GCC governments or other public or private agencies," the business daily quoted sources as saying.