Cablegate: Bahrain Central Bank Governor Reaffirms Commitment

VZCZCXRO9705
RR RUEHDE RUEHDIR
DE RUEHMK #0485 1500955
ZNR UUUUU ZZH
R 300955Z MAY 07
FM AMEMBASSY MANAMA
TO RUEHC/SECSTATE WASHDC 6872
INFO RUEHZM/GULF COOPERATION COUNCIL COLLECTIVE
RUEATRS/DEPT OF TREASURY WASHDC

UNCLAS MANAMA 000485

SIPDIS

SENSITIVE
SIPDIS

E.O. 12958: N/A
TAGS: EFIN ECON ETRD PREL BA ECTRD
SUBJECT: BAHRAIN CENTRAL BANK GOVERNOR REAFFIRMS COMMITMENT
TO DOLLAR PEG

REF: A. KUWAIT 806

B. MUSCAT 522

1. (SBU) Bahrain Central Bank governor Rashid Al-Maraj, in a
May 30 meeting with a visiting U.S.-Bahrain Business Council
delegation, strongly reaffirmed Bahrain's commitment to
maintain the Bahrain dinar peg to the dollar. While
acknowledging that the weakness of the dollar can have a
negative impact on the economy (more expensive imports), he
said that on balance the government believes that the link to
the dollar has been and will continue to be beneficial to
Bahrain, sending a positive signal to the business community
of stability and transparency in the financial sector.
"Going forward," he stated, "we will maintain this peg."

2. (SBU) Asked how Kuwait's decision to drop the dollar peg
would affect moves toward a unified GCC currency by 2010,
Al-Maraj stated that it is inevitable that the GCC countries
will continue to move towards a more harmonized financial
policy, but the process is proving to be more complex than
originally realized. It will take time, he stated. Among
the obstacles that he said were making monetary union more
difficult were vast differences in per capita income among
member states and different levels of subsidies and benefits
within the GCC.

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