Why GCC states should ditch the dollar peg and switch to a currency basket - The National

Why GCC states should ditch the dollar peg and switch to a currency basket   - The National:

"The US Fed will be normalising monetary policy in 2018, reversing the loose, unconventional policies it has pursued since the onset of the financial crisis 10 years ago. This means rising interest rates and monetary tightening. The UAE and other GCC countries (with the exception of Kuwait), whose currencies are pegged to the US dollar, will therefore have to follow suit and raise domestic interest rates, their monetary policy driven by the Fed’s actions rather than their own needs. Higher interest rates mean the cost of borrowing (on debt, loans, credit facilities and so on) for government, businesses, households and consumers will become more expensive. Tighter monetary conditions will also result in lower spending and investment. This will dampen economic activity and growth prospects in the UAE, and elsewhere around the region, exacerbating the negative effects of fiscal austerity, recently imposed taxes (VAT and excise duties), geopolitical risks and uncertainty."



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