GCC To Unify Stand Against Crisis

RIYADH: Finance ministers and governors of central banks from the six-nation Gulf Cooperation Council (GCC) pledged here yesterday to unify their position against the global financial crisis that is hampering the smooth operation of banks and stock markets in the region.

The ministerial-level meeting called for coordinated efforts to shore up confidence of Gulf institutions and individuals.

“The finance ministers discussed the mechanisms of coordination to protect the economies of the Gulf states,” said GCC Secretary-General Abdul Rahman Al-Attiyah. The emergency meeting’s main agenda was to discuss coordination of GCC states’ responses to a global downturn that threatens to stop the region’s six-year economic boom.

The meeting reviewed efforts by the Gulf governments to shore up confidence in their financial sectors by injecting huge amounts of liquidity into their banking systems. The meeting also discussed how the impact of the global financial crisis could be defused on the institutional as well as on individual fronts.

Finance Minister Ibrahim Al-Assaf said: “The economies of the GCC states, thank God, are showing strong indications of relatively higher growth rates and lower inflationary levels.”

He added: “The growth rate is expected to range between 4 percent and 6 percent in the current year despite the global economic slowdown. If the rate slows down a little, it is because of the slowdown in growth in the oil sector. But the nonoil sectors are expected to continue growing.”

The wealth held by GCC millionaires is set to shoot up by more than 50 percent to around $3.8 trillion by 2012, but this growth could now be stunted or crippled by the financial crisis, said a new report released by a management consultancy.

The Gulf states, which are preparing for a single currency, emerged from the meeting with few public statements on how they would work together.

Asked about the level of impact on Gulf economies, Qatari Minister of Finance Youssef Kamal said: “The likely effects of the global crisis, we can and we are dealing with through the measures we have already taken. The crisis proves how much we need a single currency and that a single central bank should be a supervisory body that will help in crisis hours.”

Kamal said that several subjects related to the global crisis with special reference to the role of GCC were discussed.

Yesterday’s meeting, he said, was a significant effort on the Gulf front to make assessments and to unify stances. The meeting comes after the Organization of Petroleum Exporting Countries (OPEC) announced on Friday that it would slash oil output by 1.5 million barrels a day from Nov. 1.

Most GCC countries have already moved to inject liquidity, as well as reassuring markets that funds would be available. Policymakers have been proactive, but the stock markets in Saudi Arabia, Bahrain, Kuwait, Oman, Qatar and the United Arab Emirates have taken a severe downturn this month, losing some $200 billion in days as they tracked the slide in major global stock markets. Fears of a liquidity shortage loomed over Gulf banks as a result of the global credit crunch, with banks having limited ability to borrow on the international debt market.

“Concerns have also risen over whether booming economies of the Gulf could maintain their rapid growth and governments could fulfill their funding commitments for their mega-infrastructure projects,” said a report, adding that the Gulf governments have already stepped up efforts by injecting, or pledging, huge amounts of liquidity into their banking systems. The UAE led the way by making a total of $32.7 billion available for its financial sector. It also guaranteed all deposits in UAE-based banks.

Saudi Arabia on Tuesday reportedly deposited funds in local banks to ease a shortfall of funds. The government of the biggest economy in the Arab world last week guaranteed all bank deposits, after it had also reduced compulsory bank reserves from 13 to 10 percent, in a bid to enable banks to lend more. Qatar, on the other hand, opted to pump $5.3 billion into its financial system by acquiring shares of listed local banks. Bahrain also announced the availability of funds for banks in need of liquidity, although the central bank said no requests were made.

Meanwhile, Kuwait — where stock market traders staged a walkout on Thursday demanding more government action to stem their losses — said it would guarantee bank deposits only if necessary.

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