BAHRAIN CENTRAL BANK GOVERNOR REAFFIRMS COMMITMENT

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. ********************************************* ******** Visit Embassy Manama's Classified Website: http://www.state.sgov.gov/p/nea/manama/ ********************************************* ******** MONROE