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Offline Figleaf

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Gulf States: common currency initiative
« on: December 30, 2008, 10:14:21 PM »
Gulf States will get a common currency

The six monarchies in the Gulf region, united in the Gulf Cooperation Council (GCC) have approved the creation of a monetary union. In due time, there will be a common currency, comparable with the euro for the euro zone.

Central Bank
The GCC consists of Bahrain, Kuwait, Oman, Qatar, Saudi-Arabia and the United Arab Emirates. They agreed to establish a central bank and a common currency for the region during a meeting in the Omani capital Masqat. The unified currency should come into existence around 2010.

National Governments
The agreement should now be approved by the national governments of the six Gulf states. The agreement should enter into force in December next year. (belga/adb)

Source: De Morgen
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BC Numismatics

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Re: Gulf States: common currency initiative
« Reply #1 on: December 30, 2008, 10:21:11 PM »
Peter,
  It would be interesting what the new Persian Gulf currency will be called & what it will be divided into.I wouldn't be too surprised if the name 'Dinar' is chosen & it is divided into 'Dirhams',just like the old Islamic currency was.

Aidan.

Offline Figleaf

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Re: Gulf States: common currency initiative
« Reply #2 on: December 30, 2008, 10:53:05 PM »
Don't hold your breath. The GCC has at least seen correctly that you need a common central bank for a common currency, their economies are relatively simple and the benefits of a common currency would be large. However, the time schedule for the introduction is so short that I don't think there was much study of the proposal and its technical implications. Moreover, we have to wait and see if the new central bank will have enough power to make and enforce decisions. So far, I think this is a political trial balloon.

Peter
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BC Numismatics

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Re: Gulf States: common currency initiative
« Reply #3 on: December 30, 2008, 10:58:20 PM »
Peter,
  I wouldn't be too surprised if the local currencies were allowed to remain in circulation for a while after the introduction of the new Persian Gulf currency.Apart from the Eurozone,the only currently enduring currency unions that are successful are the West African States,Central African States,& the East Caribbean States currency unions.

If it does get called the Dinar,then it would be a link to both the historic Islamic Dinar & the current Kelantanese Dinar.

Aidan.

Offline Figleaf

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Re: Gulf States: common currency initiative
« Reply #4 on: December 30, 2008, 11:24:10 PM »
The currency unions you mention were all initiated by colonial masters. The members of the union had no choice but to accede and the central bank was in fact a tool to keep post-colonial influence. The GCC is not a (post-)colonial organisation.

Keeping old coins in circulation is a bad idea. If people develop a preference for the old coins, there would be political pressure that could scuttle the whole integration process.

Actually, the word Dinar already has historic links: it is derived from the Roman denarius.

Peter
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Offline Bimat

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Re: Gulf States: common currency initiative
« Reply #5 on: January 17, 2009, 05:55:20 PM »
Hi Aidan,
Do you know that a few years ago,there was an idea proposed by Indian Prime Minister that there should be a common currency for the SAARC countries(India,Pakistan,Nepal,Bhutan,Bangladesh,Sri-Lanka,Afganistan).The response by other SAARC countries was good,but considering the current political problems between India and Pakistan,the possibility of common currency is negligible.
Further,I don't think that it will prove beneficial for any of the countries.
Aditya.
It is our choices...that show what we truly are, far more than our abilities. -J. K. Rowling.

BC Numismatics

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Re: Gulf States: common currency initiative
« Reply #6 on: January 17, 2009, 08:49:00 PM »
Aditya,
  There has also been a proposal to create a European Union-style currency & customs union for the Pacific Islands,but the proposal won't fly,as there is huge opposition in New Zealand to the idea.The Australian Dollar circulates in quite a few of the Pacific Islands states,especially Kiribati,Nauru,& Tuvalu.The New Zealand Dollar circulates in the Cook Islands,Niue,the Pitcairn Islands,& the Tokelau Islands.

Aidan.

Offline Bimat

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Re: Gulf States: common currency initiative
« Reply #7 on: January 18, 2009, 06:40:11 AM »
What do you think,will a common currency really help any of the SAARC countries,(politically as well as economically)like Euro helped a few countries?
Aditya.
It is our choices...that show what we truly are, far more than our abilities. -J. K. Rowling.

Offline Figleaf

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Re: Gulf States: common currency initiative
« Reply #8 on: January 18, 2009, 01:24:06 PM »
What do you think,will a common currency really help any of the SAARC countries,(politically as well as economically)like Euro helped a few countries?

It would definitely help and not just a little bit. A common currency brings not just efficiencies in the field of the currency area. There must be agreement on the budget deficit and inflation also. This means that it is a lot more difficult to go into a government spending spree for emotional reasons or just for lack of self-control. Also, officials from the participating countries will meet at all levels, which will increase mutual understanding. Al of this will contribute greatly to economic and social development.

One example is Ireland. On entering the euro zone, it quickly moved from the lower income member states to the top income, leaving even bank-rich Luxembourg behind. Another is Spain, which was classified as a developing country when it entered the EU and has a developed and vibrant economy today. Or look at Italy, where for decades inflation and interest rates were so high that it didn't have a mortgage market to speak of. As high inflation has come to an end, the Italian banking system is being revolutionized and the government budget deficit looks at last under control. Personally, I believe Germany was saved from deflation and a Japanese style decade of stagnation by the euro. The euro forced France to stop restrictions on bank accounts and convertibility (I lived in France as these restrictions fell). The list goes on ...

Many people, many politicians cannot accept the central bank that takes an amount of "sovereignty" away, the cooperation with other countries, the restrictions on the government budget, the "old" traditions being called into question. Unfortunately, I think the idea is impossible in the SAARC area today. You need an amount of mutual trust (also among the population) and discipline that just isn't there. You need a large majority of politicians who believe the idea is more important than populism and nationalism. Let's hope these conditions will be fulfilled in the future.

Peter
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Offline Bimat

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Re: Gulf States: common currency initiative
« Reply #9 on: January 18, 2009, 05:47:26 PM »
Unfortunately, I think the idea is impossible in the SAARC area today. You need an amount of mutual trust (also among the population) and discipline that just isn't there. You need a large majority of politicians who believe the idea is more important than populism and nationalism. Let's hope these conditions will be fulfilled in the future.

Peter
Hi Peter,
I agree with you.It is not just because of the political problems between India and Pakistan.The economic condition of any of the SAARC countries can not be compared with European countries.(Indian economy is much stronger,but that of Bangladesh,Pakistan and rest countries can be a huge problem.)Further,the chances of agreement on common currency is too low.It would be interesting to see what happens in future.
Aditya
It is our choices...that show what we truly are, far more than our abilities. -J. K. Rowling.

Offline chrisild

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Re: Gulf States: common currency initiative
« Reply #10 on: January 22, 2009, 01:25:54 PM »
The example of the euro, however, also shows the weaknesses of a currency area where "monetary action" is basically taken by one body (the ECB/Eurosystem) while fiscal and economic policy is decided upon locally by sixteen different local governments. Frankly, I doubt that in the current climate regarding European integration we would be able to create such a currency union.

And while I wish the euro a long life, I don't quite see how this dualism can work in the long run. So it may be a better idea for other regions of the world, which are politically even less integrated but are considering a common currency, to set up something like the Exchange Rate Mechanism first.

Christian

Offline chrisild

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Re: Gulf States: common currency initiative
« Reply #11 on: May 22, 2009, 06:27:07 PM »
Seems that this currency union will have four members instead of six. The United Arab Emirates announced this week that the country does currently not plan to participate in a Gulf currency union; Oman already said last year (not sure when exactly) that it is not interested. Part of the problem is that some GCC countries fear a too dominating role of Saudi Arabia.

Now whether the UAE's step was just a warning signal (while the country may still take part) or more, we will see. Not too soon though: In late March the GCC said the schedule would have to be modified. That means the Khaleeji (which is the likely but not official name of the currency) cannot be introduced in 2010.

Christian

Offline Figleaf

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Re: Gulf States: common currency initiative
« Reply #12 on: May 25, 2009, 07:21:11 PM »
According to FEM, a rightist Dutch magazine, the GCC initiative for a common currency, the Karan (see logo below) or khaleeji, depending on which leak you want to believe, is dead. In January 2007, Oman withdrew, citing the "stringent conditions for participants" which would "hinder Oman in its investment policy, aiming to make the country less dependant on the oil industry". The withdrawal of the UAE is probably connected to a decision of 5th May to establish the common central bank in Riad (Saudi Arabia). The UAE argued that it should have been put in Dubai, their capital.

Peter
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Galapagos

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Re: Gulf States: common currency initiative
« Reply #13 on: May 25, 2009, 07:46:19 PM »
Their aim was to produce first the Arabo, then the Worldo. But now their plan for world domination is dead. Divide and rule!

Offline chrisild

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Re: Gulf States: common currency initiative
« Reply #14 on: May 26, 2009, 07:52:14 PM »
All countries that currently participate in the GCC - except Kuwait - have currencies that are tied to the US dollar. So in a way they already have one single currency ... except the Gulf countries have no influence on the monetary decisions made in Washington.

Christian