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Cablegate: Central Bank Committed to Dollar Peg Despite

VZCZCXRO9177
PP RUEHDE RUEHDIR
DE RUEHMK #0184 0791324
ZNY CCCCC ZZH
P 191324Z MAR 08
FM AMEMBASSY MANAMA
TO RUEHC/SECSTATE WASHDC PRIORITY 7696
INFO RUEHZM/GULF COOPERATION COUNCIL COLLECTIVE PRIORITY
RUEATRS/DEPT OF TREASURY WASHDC PRIORITY
RUCPDOC/USDOC WASHDC PRIORITY
RHMFISS/HQ USCENTCOM MACDILL AFB FL PRIORITY
RHBVAKS/COMUSNAVCENT PRIORITY

C O N F I D E N T I A L MANAMA 000184

SIPDIS

SIPDIS

E.O. 12958: DECL: 03/19/2018
TAGS: PREL EFIN ECON BA
SUBJECT: CENTRAL BANK COMMITTED TO DOLLAR PEG DESPITE
GROWING PUBLIC PRESSURE

REF: DOHA 213

Classified By: Ambassador Adam Ereli, reasons 1.4(b) and (d).

1.(C) Central Bank of Bahrain (CBB) Governor Rasheed Al-Maraj told the Ambassador March 18 that the country's political authorities are feeling the heat of public pressure to de-peg from the dollar. He cited rising prices for basic staples as a key factor and pointed to recent bread shortages in Egypt, which he believed resulted from hoarding on the part of a worried public. (Bahrain imports 60% of its food products from EU countries, where the decline of the dollar's value, and by extension that of the Bahraini dinar, has been among the sharpest in the world.)

2.(C) Nevertheless, Al-Maraj confirmed that Bahrain had no plans to sever its peg to the dollar. When asked about reports that Qatar might take steps to de-peg (reftel), he said that he had heard no such news from his counterparts at the Qatari Central Bank.

3.(U) As if to echo the Central Bank Governor's private comments, Bahrain's press commentary reached a new level of alarm on the subject. Arabic daily "Al-Ayam" called on the Bahrain Government and other GCC governments to de-peg their currencies from the U.S. dollar, which it said had "collapsed." The editorial warned that "the drop in the dollar's value is a U.S. conspiracy that President Bush and his administration have plotted to control the markets and weaken the economies in the region."

4.(U) The Arabic daily "Al-Waqt" editorialized that of all countries, the U.S. had been the least affected by global financial difficulties, including the dollar's loss in value, rising commodity prices, and the real estate market collapse. This was proof that America had created these problems as part of a deliberate "conspiracy." The editorial continued, "The decreasing value of the dollar is not scaring the Americans as much as much as it is scaring countries that are tied to the dollar." The writer decried the "economic warfare" that he claimed the U.S. was waging in order to control countries that it has failed to dominate militarily and politically. ********************************************* ******** Visit Embassy Manama's Classified Website: XXXXXXXXXXXX********************************************* ******** ERELI

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