JEDDAH: The impact of global financial crisis and the sharp decline of oil prices on the economies of Gulf Cooperation Council (GCC) states will figure high on the 29th GCC summit that begins in Oman’s capital Muscat tomorrow.
“The GCC leaders will discuss the financial crisis in details to adopt a common vision on how to address its negative impact,” GCC Secretary-General Abdul Rahman Al-Attiyah said. He said GCC states are capable of overcoming the crisis.
The GCC, that groups Saudi Arabia, Qatar, the United Arab Emirates, Kuwait, Bahrain and Oman, owns about half of the world’s proven oil reserves and a quarter of the world’s gas reserves. They supply more than a quarter of crude produced in the world daily.
Al-Atiyyah said GCC countries would be able to offset the impact of financial crisis thanks to the budget surpluses they had gained during the past five years in addition to the wise financial and monetary policies they adopted to confront the crisis.
Oil prices have fallen from a record $147 per barrel in July to under $40 as a result of global economic depression. This will affect GCC economies that depend heavily on oil revenues. The Institute of International Finance has predicted that GCC economic growth would fall from 5.7 percent in 2008 to 4.2 percent in 2009.
During the two-day summit the GCC leaders are expected to approve an agreement on monetary union. “This will lead to the formation of a monetary authority that will set out technical details of the new GCC currency, its name and form,” a GCC source said.
Mohammed Al-Mazroui, assistant secretary-general, said the topic of monetary union would be on top of the agenda. “The summit is likely to come up with a final action plan for the unified monetary regime for the GCC states,” he said.
Asked whether the GCC countries would be able to stick to the deadline of January 2010 for achieving the unified monetary union, Al-Mazroui said: “We are very close to that already. The ensuing summit will come out with a definite answer for this.”
He said the summit would also come out with the details of the new unified GCC monetary authority. “The final draft for the GCC Monetary Authority has already been prepared, and it will be submitted for approval at the summit.”
Asked whether the new unified currency would be pegged to the US dollar, he said: “This is something that the new monetary authority will decide.”
He said five of the six GCC members — Saudi Arabia, UAE, Qatar, Bahrain and Kuwait — had already announced their resolve to join the GCC monetary union. Oman has, however, said it would stay out of it in the beginning.
Asked whether Kuwait’s move to link its currency to a basket of currencies would have any impact on the unified currency, he said: “These two (unified currency and currency pegging) are different issues.”
Last September, GCC finance ministers approved the framework for the monetary union but left questions over the timing of the launch of the single currency unanswered.