In today’s interdependent global economy, the strength of financial currencies and unilateral decisions made by some countries has a significant impact on the entire world. The dominance of the US dollar in the exchange market often jeopardizes other countries. I wonder, has the time not come to establish independent monetary policies?
Most of the time, our economies are closely linked, in a negative way, to a country that charts the economic and financial path of the whole world based on its own interests and unilateral decisions. This dependency is harmful because of the Federal Reserve’s policies and how it deals with crises. The world’s countries are forced to catch up with the Federal Reserve and follow the same monetary policy with prior knowledge of the damage that may affect their economies, especially recently after inflation rates rose to around five per cent in the USA. The US Central Bank raised interest rates ten times in 14 months to reach their highest levels in around 20 years, according to BBC.
On the other hand, the GCC states have proven their supremacy and economic and political sway at the global level, in addition to their strategic position as a geographic focal point. These countries are major players in the economic and political fields on the global scene, whether through oil trade that rules over the global market or the non-oil trade exchanges that have exceeded, for example, AED 281 billion between the UAE and the group of Gulf states in 2022, with an increase of 14 per cent compared to 2021, according to UAE newspaper Al Bayan.
Based on these facts, it is high time for the GCC countries to fully assume the helm, namely at the economic level, by establishing a common currency for the Gulf countries. The Egyptian Arab Republic and the Hashemite Kingdom of Jordan can be invited to join. Such a step would reduce dependency and ensure more independence in shaping monetary policies, in addition to enhancing economic stability and consolidating regional integration. It will also consolidate the position of the UAE and Saudi Arabia as global leaders, thanks to their infrastructure with solid economic, social, and political foundations.
It should be noted that such a model is not a product of imagination; there are successful examples, such as the BRICS Alliance (Brazil, Russia, India, China and South Africa), that seek to establish their own currency to shield the member states from the fluctuations and influence of the American dollar and gain more control over their economies and monetary policies. As Alexander Babkov put it, the unified BRICS currency will be developed strategically and will not be pegged to the USD or Euro-the BRICS plan to back their currency with gold and rare metals.
In Europe, the Euro emerged as a solid and successful alternative to get rid of the dollar’s dominance. The Eurozone (comprised of 19 member states of the European Union) has adopted the Euro as a common currency. The Euro gave these countries greater autonomy and enhanced domestic control over economic factors. Despite occasional economic challenges and disparities within the Eurozone, the Euro stands as a viable alternative to the dollar, offering the potential for successfully breaking free from dollar hegemony.
The experience of economic interdependence among GCC states is one of the most critical and realistic models in the global order so far. We must strive to free ourselves from the shackles and fluctuations of the dollar. We shall have the sole right to decide on our fate and the fate of our economies. Politics defines economy, they are mutually interdependent. In light of the current events in the world, the global economic situation, namely the monetary policies and economic independence of the states, must be revisited.
Thanks to their economic acumen and geopolitical significance, the GCC states have the potential to lead the way towards the development of a common currency in collaboration with Egypt and Jordan. This would enable them to formulate and implement monetary policies and provide them with the flexibility to respond more effectively to domestic and global economic conditions. It would consolidate the sense of collective identity and unity among the GCC states and symbolize a common vision and shared objectives, facilitating smooth trade and investment flows among countries, encouraging cross-border economic activities and promoting close cooperation in fiscal policy areas.
A common currency not pegged to the dollar would indicate the GCC’s commitment to economic independence and self-reliance. It sends a strong message to the international community that the GCC countries can chart their own economic path and reduce their dependence on external factors.
By Khalaf Ahmad Al Habtoor
UAE businessman
