Gulf states are capable of independence with their currency

Khalaf Ahmed Al Habtoor

25 May 2023

In today's interconnected global economy, the power of monetary currencies and the individual decisions made by some countries have a significant impact on the entire world.

The dominance of the U.S. dollar in the exchange market often puts other countries "on the palm of the imp." I wonder: Isn't it time for independence with our monetary policies?

Our economies are linked - mostly negatively - to a country that is navigating the economic and financial path of the whole world, based on its own interests and individual decisions, and I do not describe this link as "negative" in a vacuum, but based on the policies of the Federal Reserve and its way of dealing with similar crises.

The countries of the world are catching up with the Federal Reserve and following the same monetary policy, knowing in advance the damage that may affect their economies, especially recently after the inflation rate rose to about 5% in America, and the US central bank raised interest rates 10 times in 14 months, reaching their highest levels in nearly 20 years, according to the BBC.

On the other hand, we find that the GCC countries have proven their economic and political superiority and weight at the global level, in addition to their strategic location as a geographical focal point, as they are a key player on the global stage economically and politically, whether in terms of oil trade sweeping the global market, or non-oil trade exchanges, whose volume - for example between the UAE and the group of Gulf countries - exceeded AED 281 billion during 2022, a growth of 14%, compared to 2021.

Based on these facts, I find it time for the GCC to take the lead to the fullest, specifically on the economic front, by creating a single currency for the Gulf states, and Egypt and Jordan can be invited to join. Such a move would reduce dependency, provide greater autonomy in shaping monetary policies, enhance economic stability, and consolidate regional integration.

It will also highlight the position of the UAE and Saudi Arabia as global leaders, thanks to their infrastructure equipped with a solid foundation economically, socially and politically.

There are successful experiences such as the BRICS alliance (which includes Brazil, Russia, India, China and South Africa), where member states seek to create their own currency to protect themselves from dollar fluctuations and influence, and to gain more control over their economies and monetary policies.

According to Alexander Babakov, the single BRICS currency will be created on a strategic basis, not based on the dollar or the euro, and its security will be based on gold and other commodities, such as rare earths.

In Europe, the euro has emerged as a powerful alternative and a successful example of freedom from the grip of the dollar.

The Eurozone (made up of 19 EU member states) has adopted the euro as a common currency.

The euro provided these countries with greater autonomy in monetary policy decisions, reducing their dependence on the dollar and allowing for more domestic control over economic factors.

Despite occasional economic challenges and disparities within the eurozone, the euro stands as a viable alternative to the dollar, offering the possibility of successful liberation from its hegemony.

The experience of economic integration among the GCC countries is one of the most important and successful experiences in international regulation so far.

We must seek to be free from the dollar and its fluctuations, and to have the sole decision in our fate and the fate of our economies, because politics overtakes the economy. In light of all that the world is witnessing today, the current global economic landscape requires a reassessment, specifically of monetary policies and economic independence of countries.

The GCC countries, with their economic prowess and geopolitical importance, have the ability to lead the way in this endeavor to pursue a single currency, in cooperation with Egypt and Jordan, that enables them to formulate and implement their monetary policies, gives them the flexibility to respond more effectively to global and local economic conditions, will enhance the sense of collective identity and unity among the GCC countries, symbolize a common vision and common goals with brotherly countries, facilitate smooth trade and investment flows between countries, and encourage cross-border economic activity. Close cooperation in the areas of fiscal policy has been fostered.

A single currency that is not pegged to the US dollar, signifies the commitment of the GCC countries to economic independence and self-reliance, and sends a strong message to the international community that the GCC countries can chart their own economic course and reduce their dependence on external factors.

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