UAE panel recommends keeping peg to dollar

DUBAI - A panel of experts formed in the oil-rich United Arab Emirates to assess its currency’s peg to the tumbling dollar has recommended keeping in place both the link and the exchange rate, WAM state news agency said on Wednesday.

By (AFP)

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Published: Wed 9 Apr 2008, 9:14 PM

Last updated: Sun 5 Apr 2015, 11:36 AM

The committee of experts “has recommended keeping the link to the US dollar without making any changes to the official exchange rate, or any revaluation,” WAM said after a meeting between the panel’s members and His HighnessShaikh Mohammad bin Rashed al-Maktoum, Vice-President and Prime Minister of the UAE and Ruler of Dubai.

Central bank governor Sultan bin Nasser al-Suwaidi, who attended the meeting, said the recommendation “reflects the UAE government’s inclination to maintain the current policy of pegging the dirham to the dollar.”

He said the government’s policy takes into consideration “the overall national interest in the short and long terms, and the soundness of the national economy,” according to WAM.

The dollar is worth 3.67 dirhams.

Sheikh Mohammad, who is also the UAE vice president and ruler of the booming emirate of Dubai, said last week that the Gulf country does not plan to de-peg its currency from the flagging greenback.

But he also said a committee has been set up to further study the issue.

The currency debate has intensified in the Gulf Arab states because of high levels of inflation, which has been partly blamed on the increase in the dollar costs of imported goods resulting from the depreciation of the greenback.

Kuwait is the only state in the region which has dropped the link to the dollar in favour of a basket of currencies.

In a first high-level official recognition of the impact on prices of the deterioration of the US dollar, Suwaidi said on Monday the dollar’s decline was contributing between 35 and 45 percent of overall inflation in the UAE.

The International Monetary Fund said that inflation was around 11 percent in the UAE in 2007, contrary to a forecast of a single-digit increase in consumer prices last year.

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