Finance & Business World

Gulf Arab leaders approved a monetary union agreement that aims to create a central bank and single currency for the region that will help boost trade and strengthen monetary policy.

The agreement must now be approved by the national governments of all six members of the Gulf Cooperation Council, the group said in a statement after its leaders met today in Muscat, Oman’s capital.

The accord should go into effect by Dec. 12 next year, Kuwait’s Finance Minister Mustafa al-Shimali was cited as saying by the official KUNA news agency. The Gulf states are looking to issue a unified currency by 2010.

A single currency would allow the Gulf states to stop pegging their currencies to the dollar and implement independent monetary policy. All of the GCC states except Kuwait peg their currencies to the dollar and tend to follow the U payday cash advance.S. Federal Reserve when setting interest rates.

GCC states came under pressure this year to drop their currency pegs as inflation accelerated to records above 10 percent in five of the six countries while the Fed slashed rates to help revive the slumping U.S. economy.

Kuwait dropped the dinar’s peg to the dollar in May 2007, linking it instead to a basket of currencies including the euro, the yen and the British pound, citing inflationary pressures.

The GCC members are Saudi Arabia, Kuwait, Oman, Bahrain, Qatar and the United Arab Emirates.

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