Published On: Thu, Jun 6th, 2013

How can six GCC countries implement a single currency

Sultan Alshammari, Economic Department, Social Science School ,Southampton University.

In order to achieve a single currency union by the year 2014, many steps have been taken to achieve this objective, The fact that plans are in  place  for  pegging  GCC  currencies  to  the  US  dollar  and  creating  a custom  union  with  lifting  customs  on  national  products  shows  the success of objectives being met. Furthermore, other steps involving a standard  tariff  on  non-GCC  commodities  and  producing  a  common market has  also been  achieved. Consequently,  it is evident  that  GCC

member states have shown the capability for a currency and monetary union. With regards to future plans, the union should look to increase intra-regional trade and investment among countries – this might help to develop non- oil industries in countries and eliminate exchange rate risk and transaction cost. GCC member states have gone a long way in the case  of  monetary  and  structural  arrangement,  there  seems  to  be  a convergence towards a currency  union. However, Fiscal convergence, policies and arrangements have a long way to go, while political factors seem to be a topic with mixed emotions. On the whole, there seems to be a commitment by GCC member states to  achieve a union, however there is reluctance in some political matters. Political matters  such  as sovereignty seem to be a problem, as it can be seen at least from an economic perspective, that there is the absence of an arrangement for a supra- national  institution,  to  conduct  monetary  policy.  Furthermore, this attributes to a lack of integration in conducting fiscal policy and the different  policies   to  diversify  member   economies. Read more