gulf

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. 

Moody’s is ‘cautiously optimistic’ for the continued recovery of Middle East sovereigns (although this excludes the Dubai government, which is not rated by the ratings agency).

A sluggish global recovery will gain momentum and investor confidence will rebuild, predicts Moody’s Investors Service. So far this year, all Middle East ratings changes have been upward (Oman – Feb 18, Saudi Arabia – Feb 15). Moody’s points out that the region suffered a ‘relatively mild’ crisis. 

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. 

The banks in the United Arab Emirates do not have any liquidity problems, but enjoy high liquidity and are not in need of additional support, the central bank governor said on Wednesday.

In remarks made on the sidelines of an opening ceremony of the Sharjah Islamic Bank’s new headquarters, Al Suwaidi also said the global economic crisis has stabilized to some extent, which reflected positively on the UAE, according to the official news agency WAM. “The economic growth in the UAE will not be enormous in the coming period and we will not have to talk about inflation as its rate will be very low,” he added. 

A common single currency for the Gulf is a step closer after the central banks of Saudi Arabia, Qatar, Bahrain and Kuwait were asked to stop lending to the public sector in preparation for a unified regional central bank. It is not known whether bonds are considered part of the public sector loan portfolio.

The four states are part of the Gulf Co-operation Council, which also includes Oman and the United Arab Emirates. The latter two are not planning to join monetary union at this stage.

Apparently, the draft GCC common monetary union agreement prohibits the central banks