Dubai International Financial Centre (DIFC) has produced a notable report on the progression towards the planned Gulf Monetary Union (GMU).The Gulf Cooperation Council (GCC) states intend to launch the project by 2010. However, not everything suggested in the report can be bought at face value.


The implementation of the ambitious monetary union project requires member countries to adhere to five conditions on fiscal and monetary standards, namely limiting public debt to 60 per cent of gross domestic product (GDP); restricting budget deficit to three per cent of the GDP; limiting inflation rate to plus two per cent; ascertaining that short-term interest rate does not exceed two per cent the average of three lowest rates of member countries; and ensuring that reserves cover import bills of four months.



The report, “An assessment of the progress towards GCC Monetary Union,” stands out by concluding that three GCC states (Saudi Arabia, Bahrain and Oman) fully meet GCM conditions for its implementation at this point of time. Yet, in early 2007 Oman made a sovereign decision not to join the project. Conversely, Qatar and the UAE could not meet the inflation criterion. Yet in sharp contrast to other GCC states, Kuwait has its currency linked to a basket of currencies rather to the dollar.
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