‘Gulf states should diversify economies’

MUSCAT: Gulf Arab countries need to diversify their economies and financial sectors, IMF chief Dominique Strauss-Kahn said on Saturday.

Gulf countries were not immune from the consequences of the financial crisis but have tackled it from “a position of strength,” the International Monetary Fund managing director told Gulf states ministers at a meeting in Muscat.

“The authorities should be commended for cushioning the impact of the crisis through strong countercyclical fiscal policy, which helped sustain growth in their own economies and had positive spillovers for neighboring countries as well as contributing to global demand during the downturn,” he said.

But Strauus-Kahn added: “There is a need to continue to diversify the financial sector, and more broadly the economy. Doing so would reduce both volatility in economic activity and financing costs for private investment, which is key to providing jobs for a growing labor force.” He said the IMF has been closely cooperating with Gulf countries and is ready to support their efforts toward economic integration and monetary union. Gulf Cooperation Council members — Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the UAE — agreed at a summit in Bahrain in 2001, to setting 2010 as the target to launch the monetary union and single currency, but many experts believe that target is too ambitious and unrealistic.

Bahrain, Kuwait, Qatar and Saudi Arabia signed a pact in June to create a joint monetary union council and launch the monetary union and single currency.

The UAE was upset at the selection of the Saudi capital Riyadh to host the future GCC central bank, while Oman withdrew from the monetary union saying it was not ready to meet the preconditions.