gulf co-operation council

Central banks of the world, prepare to welcome a new addition to the family: the Gulf central bank.

Its leaders have just been announced by the new joint monetary council, in what will probably be seen as the inaugural meeting of the new joint central bank. Jurisdiction will cover Saudi Arabia, Qatar, Kuwait and Bahrain. Reuters reports the bank chairman as Saudi central bank chief, Dr Muhammad Al-Jasser. His deputy will be Bahrain’s central bank chief Mr Qassim Mohammed Fakhro.

With leaders chosen, meetings underway and an ultimate head office location of Riyadh (see map), what more is required? “There are certain legislative and financial measures that have not been completed” for the monetary union, Kuwait central bank governor Sheikh Salem Abdulaziz Al-Sabah told a news conference. Today’s meeting is expected to approve plans and a timeframe for the new institution. Read more

Saudi Arabia, Qatar, Kuwait and Bahrain will begin discussing measures to set up a common central bank at a meeting on March 30 in the Saudi capital Riyadh, Asharq al-Awsat reported, citing the secretary general of the Gulf Cooperation Council, Abdel Rahman Al-Atiya.

The meeting, to be attended by central bank governors of the four nations, will be considered the first held by the joint central bank. They will also discuss the creation of a monetary union. Read more

The central bank of Kuwait has cut the discount rate by 50 basis points to 2.5 per cent and its repo rate 25bp to 1.5 per cent. Yesterday’s reduction, the sixth since October 2008, was aimed at stimulating non-oil sectors. Kuwait has been diversifying its activities from oil towards financial services. Bank governor Sheikh Salem Abdulaziz Al-Sabah said indicators showed inflation pressure has continued to ease.

Kuwait is one of five Gulf states planning a single currency, so diverging interest rates between the states could have spelt difficulties ahead. However, the other four states have similarly low and stable rates (NB. all Gulf states except Kuwait peg to the dollar). Saudi Arabia recently stated there was ‘no chance of a rate increase’; Bahrain’s repo rate is steady at 2.25 per cent; Qatar’s is stable at 5.55 per cent; the repo rate of Oman – not joining in the first phase – has been steady at 2 per cent. Read more