The surging prices and policies that were out of sync with the local economic conditions had brought immense pressure on regional central banks to revalue and or
depeg the currencies from the dollar.
For example, Saudi Arabia has an efficient local bond market but the government has no appetite to
depeg the currency from the dollar.
Dubai: The International Monetary Fund (IMF) has suggested Gulf states
depeg from the dollar in order to fight "double-digit" inflation.
Separately, Marios Maratheftis, head of research for the Western Hemisphere at Standard Chartered, told the paper that Gulf Cooperation Council states are not in a strong position to
depeg from the dollar currently as such a step needs the right timing.
According to Dauba-Pantanacce, the reason Gulf countries have not announced any immediate plans to
depeg from the US dollar is because revenues are measured in the currency, which contends a lot of the possible problems arising from potential dollar movements.
Zadjali has also said that Oman is unlikely to
depeg its currency from the US dollar as long as oil is priced in dollars.
Bini Smaghi was out saying that China should start to
depeg from the USD, while Oman said that as long as oil was priced in USDs, the country would keeps its peg.
As we've seen, the recession of the US dollar has reflected negatively on GCC currencies linked to it; therefore I believe that GCC countries should
depeg their currencies from the dollar to curb inflation, as we did in Kuwait.
Moreover, a decision by one of the GCC countries to
depeg, without the others doing so as well, would make the prospect of a currency union in the Gulf, scheduled for 2010, virtually impossible.
Moreover, Al Suwaidi said they will not
depeg the dirham from the dollar.
The council has already faced significant hurdles in its plan to form the union: Oman's controversial decision to opt out of the union in 2006, and Kuwait's move to
depeg its currency from the US Dollar in 2007, have caused delays in the introduction of a monetary union.
It implemented timely anti-inflationary measures by being the first Arab state to
depeg its currency from the dollar.
