Renewed calls for Gulf countries to abandon dollar peg

Abu Dhabi: Gov't needs to drop dollar peg in face of soaring oil prices and plummeting value of dollar.

dollars bundle 224 88 (photo credit: Channel 10)
dollars bundle 224 88
(photo credit: Channel 10)
Calls are being heard once again for the members of the Gulf Cooperation Countries (GCC) to detach their currencies from the US dollar. In its weekly report, the Abu Dhabi Department of Planning and Economy said its government needed to drop the dollar peg in the face of soaring oil prices and the plummeting value of the dollar. Abu Dhabi is the largest of the seven kingdoms that make up the United Arab Emirate (UAE). Out of the 98 billion barrels that make the UAE the sixth-largest holder of oil reserves, Abu Dhabi controls 92 billion barrels. The report also said the country needed to rethink its currency policy and diversify, since the latest trading patterns tended to lean toward the Euro zone and Asia. The falling value of the dollar means that the value of the GCC countries' currencies does not accurately reflect the economic development in the region. According to conventional economic wisdom, when a country is experiencing strong economic growth - as the GCC are - then the values of their currencies should also increase. But since their currencies are tied to the dollar, and the US is heading for an economic slowdown, the regional central banks are forced to take measures that will keep their currencies on par with the dollar. This has resulted in record levels of inflation, making goods from non dollar-pegged countries much more expensive to buy. In recent months, many of the GCC countries which depend on foreign labor from Asia to man their rapidly growing economies, have experienced strikes calling for higher wages since the money that the workers send home is losing its value. The Media Line News Agency