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The UAE throws its toys out of the pram
The UAE is no longer taking part in the proposed monetary union between GCC nations. Is the UAE having a federal tantrum over the location of the Gulf Central Bank?
May 20, 2009 3:06 by Dana El Baltaji
The UAE will no longer be part of the long-awaited monetary union among GCC States, reports the nation’s official news agency WAM.
“The UAE extends its best wishes for success to those GCC member states who will join the monetary union agreement,” a source at the foreign ministry said on Wednesday. “The UAE’s past record of implementing the GCC’s resolutions is strong proof of its belief in joint GCC action.”
The announcement comes only weeks after the council agreed on Riyadh, Saudi Arabia as the location of the GCC’s Central bank. The UAE expressed “reservations” at the decision, although officials failed to explain why.
In 2004, the UAE requested to host the Central Bank as a condition of its participation in the region’s monetary union.
The UAE is the third nation to disrupt monetary union talks in the region; Oman pulled out of the union in 2006, and Kuwait caused complications when it depegged its currency from the US Dollar, and pegged it to a basket currency instead.
Squabbles over the location of the central bank have also delayed the monetary union’s progress for months, and in March 2009, officials admitted they may not meet the 2010 deadline.
“The withdrawal of the Gulf’s second largest economy from monetary union is a major blow to the single currency project,” said Simon Williams, regional economist, HSBC Middle East. “However, we had long assumed that the single currency would not be launched on schedule at the start of 2010, and the UAE’s withdrawal therefore has no meaningful impact on our view on economic performance or on regional monetary policy.”
“The UAE’s withdrawal from the single currency project does not indicate any change in its maintenance of the peg to the US dollar, nor is it a precursor to a change in the UAE’s currency regime,” he added.
The UAE is on a roll this week. On Monday, Sheikh Mohammed bin Rashid Al Maktoum, Dubai’s Ruler, shocked the emirate’s investors when he issued a decree appointing Rahman Saleh Mohammed Al Saleh as director of Dubai’s Department of Finance in place of Nasser Hassan Al Sheikh, the man who spearheaded the emirate’s bailout plan. No explanation was given for the change.
Kipp gets the feeling that something big is brewing.