Gulf states urged to coordinate more for financial stability

Gulf central bank chiefs began a meeting yesterday with a call for more coordination to achieve financial stability and face continued fallout from the global economic downturn.

"This period necessarily requires that our attention is focused on issues related to achieving financial stability," Kuwait central bank governor Sheikh Salem Abdulaziz al-Sabah said in his opening speech.

"Inflationary pressures have greatly declined, but this does not mean they have disappeared... This has enabled Gulf central banks to adopt measures to face the impacts of the global financial crisis" and of slow growth, he said.

Sheikh Salem also called on supervisory and monitoring agencies in Gulf Cooperation Council states to adopt "early-warning systems to boost their ability" to deal with financial crises in the future.

The meeting, attended by central bank governors of the six-nation GCC, will discuss a host of issues, mainly coordination to confront the effects of the global downturn on the Gulf financial system. Discussion will also focus on the GCC monetary union, which was officially launched at the GCC summit in Kuwait last December, with the participation of only four out the six member states.

The summit approved a monetary union pact that called for establishing the Gulf monetary council, planned to become the unified GCC central bank that would issue a single currency.

GCC assistant secretary general for economic affairs Mohammad al-Mazroui told the governors that a key meeting will take place in Riyadh next week.

"We are looking forward for the first meeting of the board of directors of the Monetary Council next week, which will signal the launch of its work," Mr Mazroui said.

Bahrain, Kuwait, Qatar and Saudi Arabia have ratified the pact while the other two members (Oman and the United Arab Emirates) have opted out of the union.

The UAE, the Gulf's second largest economy, withdrew from the union over objections to selecting the Saudi capital Riyadh as the base for the future Gulf central bank. Oman said it could not meet the union's prerequisites.