The Government of Abu Dhabi has called for a “rethink” of monetary policy across the GCC, including the US dollar peg, amid rising inflation, record oil prices and fading prospects for a single currency by 2010.

A report released yesterday by Abu Dhabi’s Department of Planning and Economy (DPE), an arm of the emirate that is not part of the Federal Government, urged other Gulf countries to take a “unified stand” and consider de-pegging from the US dollar and adjusting exchange rates to increase the value of their currencies.

“Pegging was adopted when oil prices were low and the greenback still at the height of its strength,” the report said. “Today, the dollar is falling relentlessly and oil prices are skyrocketing. This new reality calls for a rethink of monetary policies.”

All GCC countries, except for Kuwait, peg their currencies to the dollar. Kuwait abandoned its dollar peg last year in favour of pegging to a basket of world currencies thought to be heavily weighted to the dollar. Most other Gulf states – including the UAE – have steadfastly asserted that they would not abandon dollar pegs ahead of the introduction of a single currency, originally scheduled to be introduced in 2010. The unified currency plan has been delayed as countries work out the location and governance structure of a regional central bank.