At the annual meeting of the Cooperation Council for the Arab States of the Gulf (GCC), which includes Kuwait, Saudi Arabia, Bahrain, Qatar, the United Arab Emirates and Oman, several steps towards further integration of these countries were announced. While remaining independent, the Gulf states will introduce a common market in 2008. This means that citizens of all six monarchies will have equal rights in any of the GCC countries. For example, a Kuwaiti citizen will be able to work in Saudi Arabia, buy shares in Bahrain, live in Qatar, and own property in Oman.
But the main news of the council meeting is that the GCC has approved a transition to a single currency by 2010, the name of which has not yet been decided. Thus, the long-standing idea of creating a powerful currency in the region will become a reality in just over two years. The Gulf states are united not only geographically, but also economically. All of them derive a significant portion of their revenue from oil extraction, petroleum product manufacturing and their subsequent export. Therefore, it is possible that the new currency's exchange rate will be highly dependent on oil prices on world markets.
The currencies of the Gulf states already have much in common. All of them, except the Kuwaiti dinar, are pegged to the US dollar. In 2007, this caused many problems for the Gulf states – the dollar constantly fell against all world currencies, while oil prices, on the contrary, rose to new record highs. Nevertheless, the GCC meeting decided not to unpeg the national currencies from the dollar. The Gulf states make oil contracts in dollars, so the inflow of American currency into the country is continuous. Changing direction under such conditions, especially with a monetary reform on the horizon, the GCC leaders considered an unjustified risk.
The benefits of introducing a single currency are obvious. First, it will promote trade and help countries establish that common market, because with a single economic space, converting money into another currency each time one crosses the border is very costly. On the other hand, having a strong currency can revive the stock market and reduce risks, since when several countries pay in one currency, it is harder to collapse.
Despite these benefits, there are also those in the Gulf who are dissatisfied with the reform. For example, Oman announced that it would keep its local currency, and the UAE insists that by 2010 it will simply not have time to introduce new money – too many technical difficulties need to be resolved.
Oman's arguments are also quite understandable. The country's GDP grew by 6.6% in 2006, while, for example, Saudi Arabia's grew by only 4.3%. This means that if the countries introduce a single currency, Saudi Arabia will slow down Oman's development. The same situation is in Europe: countries that joined the European Union in 2004 are in no hurry to join the eurozone. Therefore, overall EU GDP is growing faster than in the eurozone.
Europeans know only one currency that circulates in several countries – the euro. Africans know at least one more. This is the colonial franc, which has two variants – the Central African and the South African. Such a currency was created back in 1945 for the former French colonies in Africa. Its exchange rate was pegged to the French franc. But when Europe introduced a single currency, one African franc became worth 0.152449. Accordingly, one euro could be bought for 655.957 African francs. Currently, francs are in circulation in 13 African countries.
If the question of creating a single currency in the Gulf has been discussed since 2001, in southern Africa the same issue has been discussed for several decades. In 2005, it was reported that South Africa, Botswana, Lesotho, Swaziland, Namibia, Zimbabwe, Angola, Mozambique, Malawi, Tanzania, Zambia, Mauritius, the Seychelles and the Democratic Republic of the Congo intended to introduce the 'afro' in 2016. There were also rumors in the market that New Zealand and Australia could unify their currencies. In early 2006, the prime ministers of both countries cautiously spoke about this. In their view, a currency should be introduced only if the economic feasibility of such a step is proven. Apparently, that feasibility was lacking – nothing has been heard about the initiative since 2006. To all this diversity of 'single currencies', one should add the long-standing intention of Belarus and Russia to switch to a single currency. In 2004, Vladimir Putin and Alexander Lukashenko announced that Belarus would switch to the Russian ruble in early 2006. But it remains a dead letter.
If we imagine that all ideas about unifying currencies in different parts of the world are realized, then in a few decades the number of national currencies will significantly decrease. Businessmen will enjoy the freedom of capital movement and the absence of standing in lines, while numismatists will line up to get a rare Kuwaiti dinar or Omani rial from 2007.