A senior Qatar central bank official on Thursday urged Gulf Arab states to press on with their own monetary union project, while learning lessons from the eurozone.
“I think that the GCC (Gulf Cooperation Council) countries should benefit from the euro experience and continue with the GCC monetary union project without a delay,” Khalid Alkhater, director of Research and Monetary Policy at the bank, said.
He emphasised that the monetary union is a strategic long-term project for these countries on both economic and political scale.
“The costs of not establishing it could be very high for the GCC countries…in the future,” he said in an interview with Reuters.
The six member GCC has been working to create a monetary union since the early 1980s with little success so far. Four of them – Qatar, Saudi Arabia, Kuwait and Bahrain – formed a joint monetary council and a forerunner to a Gulf central bank in March 2010. Oman and the UAE pulled out from the unification efforts in 2006 and 2010 respectively.
The monetary council has since kept a low profile. Many observers believe a single currency for the region will not become a reality for at least five years.
Analysts believe the absence of the UAE, an economic hub in the region, will water down the efficiency and effectiveness of the single currency. Most GCC countries peg their currencies to the dollar.
Alkhater, who is not a member of the Gulf monetary council, said that the GCC states had more in common than eurozone states, sharing the same culture and language and facing similar political and economic challenges.
“We have six countries that are homogeneous almost in all domains. They share similar production structures, which mean that they are all subject to symmetric shocks,” he said in an e-mail interview with Reuters.
“Therefore… the GCC countries are better qualified to satisfy the optimum currency area criteria, and therefore to establish a monetary union, than the Eurozone.”
“Now, we have a call by some countries (the Saudi Kingdom) for political union, therefore, the monetary union can serve as an intermediate step in achieving that goal,” Alkhater said.
Saudi Arabia proposed a Gulf Union in December last year as a measure to counter social unrest in the Middle East. Its eastern province as well as Bahrain and Oman have witnessed unrest since the onset of the Arab uprisings. Tensions over Iran’s disputed nuclear programme are also helping the GCC countries come closer.
Some GCC states are wary of Riyadh’s increasing political and economic clout in the region. Saudi Arabia controls about 30% of world’s proven global oil reserves.