ARAB BANKER SAYS TOO SOON FOR SINGLE CURRENCY
Gulf Arab states must coordinate
economic policies more closely before moving towards their goal
of a unified currency system, the President of the Arab Bankers
Association said.
    Hikmat Nashashibi told a news conference at the end of an
Arab currency traders meeting: "We have to start with
coordination of fiscal policies as a prerequisite for a common
system of currencies ... There is quite a substantial way to go
yet."
    He said only then would a unified Gulf currency system be a
plausible project.
    The six nations of the Gulf Cooperation Council -- Saudi
Arabia, Kuwait, Bahrain, Oman, Qatar and the United Arab
Emirates --  have held a series of meetings this year to
examine linking their currencies to a single peg in a system
which bankers say could be modelled on the European Monetary
System (EMS).
    At present, five currencies are linked either officially or
in practice to the U.S. Dollar, while the Kuwaiti dinar is
pegged to a trade-weighted basket of currencies.
    A common currency system or EMS-style "grid" would, in
theory, foster regional trade by providing a basis for stable
exchange rates, but Nashashibi said inter-Arab trade is at a
very low ebb and capital flows between Gulf states remain
small. "Capital markets in the Arab world are still in their
infancy," he said.
    Nashashibi said lack of experience among Arab banks, a
paucity of financial instruments and a legal framework that
often does not recognise the western banking concept of
interest have hampered the growth of Arab markets.
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