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Gulf Arab nations put into force a monetary pact Tuesday, moving a step closer toward the elusive goal of a single regional currency and greater integration between the mainly oil-rich states.
The announcement by Kuwait's finance minister came as leaders from the six-member Gulf Cooperation Council nations were wrapping up a two-day summit in which they launched a regional electricity project and discussed, among other issues, Iran's nuclear program and the war in Yemen.
Mustafa al-Shimali told Kuwait's official KUNA news agency that the launching of the monetary pact would now allow the governors of the central banks of the six GCC nations to set up "a timetable for the establishment of a regional central bank, with the aim of launching a unified Gulf currency."
The GCC, which groups Kuwait, Saudi Arabia, Qatar, the United Arab Emirates, Oman and Bahrain, has been trying for years to develop a unified currency as part of a push for broader economic integration between their predominantly oil-rich nations.
"This is something that a lot of people were looking forward to," said John Sfakianakis, chief economist at the Riyadh, Saudi Arabia-based Banque Saudi Fransi-Credit Agricole Group. "This is a good step forward, but we also need to have some clarity on the authority of the monetary council" such as the timeframe at which they will move ahead.
The plan has hit repeated obstacles, however, with the United Arab Emirates and Oman saying they would not participate.
Still under review is whether the unified currency would be pegged to a basket of currencies, the U.S. dollar or some other currency. All GCC nations peg their currencies to the dollar except for Kuwait which relies on a basket of currencies.
Also unclear is whether the UAE - the second largest economy in the Arab world - will do an about-face and join the union. Oman has said it won't join because it is not ready.
Al-Shimali voiced hopes that the two nations would join "in the near future."
The UAE, a federation of seven semiautonomous sheikdoms that includes glitzy and now debt-saddled Dubai, said it was pulling out shortly after GCC officials selected Saudi Arabia - the Arab world's largest economy and home to the world's largest proven reserves of oil - as the future headquarters of the new central bank.
"They have made it clear that they will move ahead without the UAE and Oman," said Sfakianakis. But "one should be optimistic that at some later stage, the UAE and Oman ... or one of the two, will eventually become a participant in this."
"At this stage, I see it as highly unlikely," he said.