Kuwait forex shift will take time to work-cbank

KUWAIT - Kuwait’s decision to drop its peg to the US dollar and adopt a basket of currencies will take time to check rising prices, the central bank governor was quoted on Sunday as saying.

By (Reuters)

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Published: Sun 1 Jul 2007, 4:52 PM

Last updated: Sat 4 Apr 2015, 10:10 PM

Kuwait broke ranks with other Gulf Arab oil producers and unshackled its dinar from the weak dollar on May 20, saying it wanted to contain the impact of rising import costs on inflation.

‘The decision to depeg the dinar would not change the reality of high inflation (immediately) but requires time....,’ Al Anba newspaper quoted Shaikh Salem Abdul-Aziz Al Sabah as saying in an interview.

‘It is not only the decision to depeg the dinar from the dollar that will decrease average inflation, but rather several economic policies need to work together...and this requires time,’ he said.

Kuwait’s annual consumer price inflation rose to 5.15 percent in March, the latest figure available, driven by higher prices for housing, food and communications.

The dollar fell to a record low against the euro in April, but has since regained some ground.

Kuwait’s central bank has held the dinar steady at 0.28806 to the dollar since May 20, when it allowed an appreciation of about 0.37 percent.

Kuwait is likely to let its dinar rise a further 0.35 percent against the dollar in 2007 as the euro resumes an uptrend in the third quarter, Standard Chartered said last week.

Standard Chartered had previously forecast the dinar would appreciate by a total of 1 percent in 2007.

Kuwait had pegged its dinar to a currency basket until it adopted a dollar peg in 2003 to prepare for regional monetary union in 2010.

The timetable for monetary union has been in doubt since Oman said last year it would not meet the deadline to adopt a single currency with Kuwait, the United Arab Emirates, Saudi Arabia, Qatar and Bahrain.

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