GCC central bank gets nearer
Standard Chartered believes that a significant step towards the monetary union of the members of the Gulf Cooperation Council will be taken next week. GCC leaders are meeting on May 5 to discuss where the common central bank will be located. In a brief note by Marios Maratheftis and Mary Nicola, Standard Chartered quotes a senior GCC official as saying four states want the honour.
“The location of the central bank remains a key point of contention among the GCC as several states are vying to host the central bank. Officials have said that a monetary council cannot be established without first deciding on the location,” the authors write. Once the decision has been made, the GCC will decide on a new timeframe for monetary union. Standard Chartered says the existing 2010 deadline now looks unlikely to be met.
“In our view, the key obstacle for the introduction of a Gulf common currency and monetary union is the absence of GCC-wide, supranational institutions, the main one being the GCC central bank. The economic convergence criteria which include inflation, interest rates, fiscal balances and currencies are secondary,” the bank says.
It points out that the European Monetary Institute was established in 1994, five years before the euro was introduced.