New York : Saudi billionaire Prince Alwaleed bin Talal raised the possibility that the Kingdom may need to
depeg its currency in the future as the country undergoes unprecedented social, political and financial change.
Additionally, some Gulf banks, particularly in Qatar have to bring back substantial negative $positions to below 25 per cent of shareholders' equity, protecting the banks from a potential
depeg.
Zadjali has also said that Oman is unlikely to
depeg its currency from the US dollar as long as oil is priced in dollars.
"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.
The decision by Malaysia to '
depeg' the Ringgit followed China's decision to revalue the Yuan.
Additionally, some Gulf banks, particularly in Qatar, have to bring back substantial negative dollar positions to below 25 per cent of shareholders' equity, protecting the banks from a potential
depeg.
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.
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.
