Gulf Arab leaders yesterday chose the Saudi capital, Riyadh, as the base for a joint monetary council that will evolve into the Gulf central bank, although they were still undecided on when to launch a single currency.
Top state officials from the GCC countries agreed the move at their 11th consultative summit in Riyadh.
“An agreement was reached on the headquarters of the monetary council that it should be in the city of Riyadh,” said GCC Secretary-General Abdulrahman al-Attiyah.
“Concerning the timeframe, no decision has been issued yet on the currency,” Attiyah told reporters, later adding the central bank would be based in Riyadh.
The United Arab Emirates, one of the major candidates to host the bank, said afterwards it had “reservations”.
“The UAE delegation to the 11th GCC consultative summit has expressed reservation at a resolution for selecting Saudi capital Riyadh as headquarters of the GCC Central Bank,” a news item said on the UAE state news agency Wam.
The Gulf needed to choose a venue before a monetary council could begin operating and the decision has been under discussion for the past year.
This council will decide on a new timetable to issue the single currency, the GCC-Secretariat said in March, its first official acknowledgement the Gulf would fail to meet the 2010 deadline.
Oman decided in 2006 not to join the monetary union and Kuwait severed its dinar’s dollar peg in 2007, breaking a deal to keep it intact until union.
“This announcement is a tangible signal of the political will to move ahead with the project,” said Giyas Gokkent, chief economist at National Bank of Abu Dhabi. “This all boils down to political will and the very fact they have agreed on the location is positive.”
A Reuters poll of 21 economists and analysts this week had said Saudi Arabia was the most likely choice for the headquarters, ahead of Bahrain and the UAE, both of which have well-developed financial centres.
“They are recognising the significance of Saudi Arabia as an economy and the importance of Saudi Arabia to pull the other countries along,” said John Sfakianakis, chief economist at SABB bank, HSBC’s Saudi affiliate.
“They need size to push ahead with the effort. The Saudis need to create momentum.”
Gulf policymakers have said global financial turmoil and a collapse in oil prices have made achieving monetary union more urgent.
HH the Emir Sheikh Hamad bin Khalifa al-Thani took part in the GCC consultative summit. It was also attended by HE the Prime Minister and Foreign Minister Sheikh Hamad bin Jassim bin Jabor al Thani.
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