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The United Arab Emirates has withdrawn from Gulf Arab plans for a single currency, becoming the second country to withdraw from the plan for monetary union.
The country's monetary policy will remain unchanged, with the UAE dirham pegged to the US dollar, the state news agency WAM reported on Wednesday.
Oman ruled out joining a single Gulf currency in 2006 and the UAE's move threatens to end the project for monetary union entirely.
But a senior source in the Gulf said that the four remaining states are still committed to monetary union.
"Saudi Arabia, Kuwait, Qatar and Bahrai
Single currency for Middle East - approved by IMF.
FINANCIAL UNIFICATION IN THE MIDDLE EAST
The International Monetary Fund has approved plans that will achieve monetary union for Middle Eastern countries by 2005 and the launch of a single currency by 2010. The IMF's policy discussion paper states: "The general conclusion is that the benefits do not seem too large, but that neither do the costs." The IMF has mapped out the steps that will be taken during the unification period to establish the single Gulf currency within the first decade of the new millennium.
Gulf states push for single currency
Six Arab Gulf states have turned to the eurozone for advice in how to successfully launch a single currency.
At this week's meeting of Gulf central bankers in Riyadh, the six Arab states vowed to press ahead with plans for monetary union and the launch of a single currency.
Big hurdles remain for Gulf single currency
May 06, 2009 at 18:59
Even bigger hurdles in the quest for a Gulf Arab single currency lie ahead after Tuesday's decision to base a planned regional central bank in Saudi Arabia cleared one obstacle to monetary union, analysts said.
To avoid new snags that may further delay the union, initially planned for 2010, Saudi Arabia may have to counter any perceptions it is overly dominant in the region by leaving the central bank's governor job to another bloc member.