Connect with us

Hi, what are you looking for?

Capital Business
Capital Business

World

Weaker dollar may force Gulf states to appreciate currency

KUWAIT CITY, Nov 1 – A weaker dollar, to which most of the currencies of the Gulf are pegged, may force the region\’s states to appreciate their currencies, a top Arab monetary official said on Monday.

"Our region is not shielded against the impact of the currency war because our currencies are pegged to the dollar," Jassem al-Mannai, director general of the UAE-based Arab Monetary Fund told the Kuwait Financial Forum.

"This (currency war) will impact the Arab economies, especially with regard to (higher) inflation and other problems," said Mannai.

"If the (US) dollar continues to slide, it may force countries in the (Gulf) region to appreciate their currencies."

The forum, in its second year, is a two-day meeting of regional banking and finance leaders, which is this year focusing on the impact of the global financial crisis on oil-rich Gulf countries.

Mannai later told reporters that if a currency war flares, "I believe the GCC states will certainly start discussing and evaluating the impact on their currencies."

Five of the six-nation Gulf Cooperation Council (GCC) states have their currency pegged to the dollar, while Kuwait pegs its dinar to a basket of currencies in which the dollar is believed to constitute between 70-80 percent.

The GCC consists of Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates, together responsible for supplying just under a fifth of the world\’s crude needs.

The issue of GCC dollar peg was debated during the boom years of 2007 and 2008 when the heating Gulf economy and sliding US economy went in opposing directions.

Advertisement. Scroll to continue reading.

Gulf states needed to raise interest rates in a bid to halt soaring inflation which hit double digits in most of Gulf states, but were forced to maintain low interest rates because of the dollar peg.

The issue also attracted attention after wild speculations on GCC currencies, especially from foreign money, under the assumption that GCC states were going to appreciate their currencies.

But the GCC states, spearheaded by Organisation of Petroleum Exporting Countries kingpin Saudi Arabia, rejected pressures for de-pegging.

Mannai and senior advisor at the International Monetary Fund Alfred Kammer also warned of rising inflation in Gulf states because of high food prices.

Four GCC states — Bahrain, Kuwait, Qatar and Saudi Arabia — have signed a monetary council pact and set up a monetary council in the Saudi capital Riyadh, while the remaining two states pulled out.

Click to comment
Advertisement

More on Capital Business

Executive Lifestyle

NAIROBI, Kenya, Mar 12 – The country’s super wealthy individuals are increasing their holding of bonds, gold and cash, a new report by Knight...

Ask Kirubi

NAIROBI, Kenya, Mar 9 – Businessman and industrialist Dr. Chris Kirubi has urged members of the public to exercise extreme caution when making any...

Ask Kirubi

NAIROBI, Kenya, Mar 24 – Businessman and industrialist Dr. Chris Kirubi is set to own half of Centum Investment Company PLC, following a go-ahead...

Ask Kirubi

It is without a doubt that the COVID-19 pandemic has caught the whole world by surprise. Although its full impact is yet to be...

Headlines

NAIROBI, Kenya, Mar 18 – Commercial Banks have been ordered to provide relief to borrowers on their personal loans, with loans eligible from March...

Kenya

NAIROBI, Kenya, Jun17 – Kenya’s tea leaves manufacturer Kericho Gold, has been awarded the Superbrands Seal by Superbrands East Africa for their quality variety...

Coronavirus

NAIROBI, Kenya, Apr 13 – As the local telecommunications industry gears up to roll out 5G networks in the country, the Communications Authority of...

Coronavirus

NAIROBI, Kenya, Mar 22 – Airtel Kenya is offering free internet access for students in order to enable continued learning at home in the...