UAE pulls out of GGC monetary union project

Published: May 22, 2009

The UAE withdrew from plans to join a proposed GCC monetary union this week, expressing reservations about a proposal to base the union's central bank in Riyadh. The UAE wanted to host the central bank on its own territory. 

It is the second country to leave the project, following Oman's departure in 2006. Now only Saudi Arabia, Qatar, Bahrain and Kuwait remain in the project, although Kuwait's move away from a dollar peg in 2007 makes its participation unlikely as well.

Angus Blair, head of research at Beltone Financial in Cairo, says: "The UAE's decision is political dynamite. It had already expressed reservations about the plan to have the central bank in Riyadh, but clearly didn't express them loudly enough."

He adds: "I don't think the project will happen if Saudi Arabia insist on having the central bank in Riyadh. A central bank needs people visiting it all the time, and it's very difficult to get visas into Saudi Arabia, so it's not practical. The UAE or Bahrain would be better choices."