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Qatar remains committed to dollar peg
Source: BI-ME and Reuters , Author: BI-ME staff
Posted: Wed September 12, 2007 12:00 am
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QATAR. Qatar ruled out revaluing its dollar-pegged currency for now. "We are committed to the peg," Sheikh Abdallah bin Saud Al Thani Qatar's central bank governor said on the sidelines of an Arab central bank governors meeting in Damascus.

Asked if Qatar planned to change the value of the riyal, he said, "No, not for the time being."

Sheikh Abdallah said inflation would fall to 10% within a year on measures to control rising rents and prices.

"We are taking measures to control prices and rents which would lead to a gradual decrease in inflation," he added.

Inflation rose to a record 14.81% at the end of March and stood at 12.8% in June.

The central bank Governor's announcement comes amid increasing speculation that Gulf states could follow neighbouring Kuwait in linking their currencies to a basket of currencies in order to ease runaway inflation.

Qatar, Saudi Arabia, the UAE, Kuwait, Bahrain and Oman  agreed in 2003 to peg their currencies to the dollar as a step towards creating a single currency by 2010.

Kuwait, where inflation rose to 12-year highs above 5% in March, April and May, abandoned its peg to the dollar in May  saying the US currency's weakness was fuelling inflation by making some imports more expensive.

Because of the peg to the dollar, Qatar tracks US interest rates, limiting the central bank's ability to fight inflation. Qatar, which is contending with inflation almost three times as high as Kuwait, was tipped by analysts along with the UAE as likely to change exchange rate policy.

Hamad al-Sayari, governor of the Saudi Arabian Monetary Agency, conceded last weekend that meeting the 2010 deadline would be increasingly difficult but he also reaffirmed GCC members' commitment to the dollar peg.

Sheikh Abdallah did not say how Qatar would respond if the US Federal Reserve cuts interest rates.

Gulf states are  concerned by the growing possibility for a US interest rate cut this month. GCC rates usually follow the Fed but economists say it is unlikely the booming Gulf, cyclically out of step with the US, will follow any Fed decision to cut rates this time.

Qatar gets around 50% of its imports from the euro zone, according to France's Calyon bank, compared with more than a third in Kuwait.

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