Keep the dollar peg says IMF

Monetary officials are still in support of the GCC pegging its currencies to the US dollar.

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By  Elizabeth Drachman Published  November 25, 2004

International Monetary Fund (IMF) officials have recommended that Gulf countries continue pegging their currencies to the US dollar prior to shifting to a single regional currency. Continuing to peg their currencies to the dollar would “leave public policy makers on already familiar grounds and facilitate the transition” to a single currency for the six GCC countries, said Mohsin Khan, IMF director for the Middle East. Khan even suggested that once the GCC adopts its own it currency it should perhaps peg it to the euro to keep it stable. In 2001, the six GCC countries agreed to adopt a single currency by 2010, in an effort to stimulate trade and economic integration in the region. Since most exports and financial assets of the GCC have been dollar-denominated, the peg has assured external stability, said Khan. Bahrain’s Central Bank Governor Sheikh Ahmed Bin Mohammed Al Khalifa said the GCC countries remained committed to the unified currency. “We are now reaching a point of making some essential decisions on the convergence criteria,” he said. “The creation of a unified currency will greatly increase the area’s attractiveness as a destination for foreign direct investment.”

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