Every few months, news re-emerges that the Khaleeji – the informal name for the Gulf’s unified currency – could be just around the corner. Officials meet,promises are made, and for a day newspapers run stories that paint the picture of a future monetary utopia, without discussing how to confront the challenges inherent in creating a single currency.
Those challenges have been highlighted in the months since the Greek government
confessed its financial problems. After owning up to €50 billion ($68 billion) in loans due at the end of this year and a 12.7 percent deficit – far in excess of the eurozone’s 3 percent limit
– Greece appeared ready to drag the healthier and more productive economies of Europe into trouble. Germany voiced its consternations the loudest because it has the most to lose. A rescue plan called for a majority of eurozone countries to loan moneys based on the size of their economies
and populations, meaning Germany and then France would pay the most.Despite the ominous news rom Europe, the central bank governors from Saudi Arabia, Kuwait, Bahrain, and Qatar met in March to form the monetary council that will be the precursor to the Gulf’s central bank. They appointed
Saudi Arabian Monetary Agency chief, Mohammed Al Jasser, as chairman.
At first glance, a Gulf monetary union may seem unnecessary. With the exception of Kuwait, the region’s currencies are pegged to the American dollar. Given Europe’s disparate currencies and
high number of national borders, the euro was expected to lower the costs of trade between countries. With fixed exchange rates already in place, Gulf economies would be unlikely to see such a benefit.
“The benefits you have [in a monetary union] are more transparency, lower transaction costs, lower exchange rate volatility and more liquidity, but these gains are very small. And everybody knows that
these are very small,” says Alexis Antoniades, an economics professor at Georgetown University in Qatar’s School of Foreign Service.
Antoniades says that trade did not increase nearly as much as expected in Europe after the introduction of the unified currency. The motivators and results of the union have been largely political, just as they will be in the Gulf.

While transaction costs may not be significantly lowered, investors and economists frequently cite the region’s lack of data as a significant problem. Antoniades,
whose work focuses on inflation, says basic numbers taken for granted in other parts of the world are not available here. Simply going through the processes necessary to introduce monetary union may have benefits in the Gulf.Japan, you have a lot of access to data. Andnot only do they have data, you can find out the way they get it. Here, it is hard because they don’t have it or they don’t publish it,” he says. “They are trying to build capacity and they are doing it, but it takes time.”

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