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Will there be a Mideast single currency?

By John Defterios, CNN
Rasheed Al Maraj, governor of the Central Bank of Bahrain says it is important to get details of single currency right.
Rasheed Al Maraj, governor of the Central Bank of Bahrain says it is important to get details of single currency right.
  • Progress on single Gulf currency painfully slow
  • Idea launched in 2001 on heels of Euro
  • Oman and UAE already opposed
  • Politics weigh heavily

John Defterios is a CNN anchor and presenter of Marketplace Middleeast

Manama, Bahrain (CNN) -- Bahrain may be the least populated Gulf state, but because of its historical role as the first financial center for the region, government officials have their finger on the economic pulse.

The reading on the ground in Bahrain, which straddles Saudi Arabia's giant oil fields, is that there's no rush to go to a single currency for the region.

The single Gulf currency concept was launched in 2001, following hot on the heels of the Euro. Nearly ten years into the effort, progress is painstakingly slow.

The Gulf Cooperation Council is made up of six countries -- Saudi Arabia, Kuwait, United Arab Emirates, Oman, Qatar and Bahrain. Two of the four, Oman and the UAE, have already opted out.

Oman's ruler, Sultan Qaboos bin Said, decided the pace of globalization was too rushed. The UAE left the process after Saudi Arabia's capital was named the new home of the Gulf Central Bank. Politics weigh heavily in this three-decade-old institution.

There is a concern expressed privately that Saudi Arabia will dominate procedures.
--John Defterios, CNN
  • Bahrain
  • Saudi Arabia
  • Kuwait
  • Qatar

Delivering the new currency will be challenging for the final four.

The Secretary General of the GCC has declared that the new currency will be pegged to the dollar. That's okay for three of the four, but Kuwait moved to a basket of currencies a few years ago; growth and inflation are well under control there. That issue needs to be addressed.

There is also a concern expressed privately that Saudi Arabia will dominate procedures beyond the headquarters of the central bank. With 22 million people, it is three times bigger than all the other members combined.

One top Bahraini official said that is all the more reason to create the currency, defining the Kingdom as the Germany of the Gulf. When the Berlin Wall fell in 1989, European Commission officials thought it important to keep Germany anchored to Western Europe, hence the move to the single market and the single currency.

A similar strategy applies here, but without a historic driver to push for action, there is a premium now on getting it right versus just getting it done.

With the Greek crisis playing out over that country's record budget deficits, which have put pressure on the Euro, there seems solid support for that logic.

Rasheed Al Maraj, Central Bank governor of Bahrain, told CNN that a fresh deadline is still off the table and that this effort needed more time. It is better to get it right, he said, because there is no turning back.

After the initial target of 2010 proved unrealistic, members of the GCC have been floating the idea of 2015. That new target didn't get even a subtle nod of agreement within the Governor's office.

The inaugural meeting of the Arab Monetary Council, the body responsible for regional monetary union, will hold its first meeting at the end of this month in Riyadh.

Most agree that a single currency would help lower barriers to trade and investment -- Europe is proof of that -- but finding the right time to do it is another matter.