Excess cash, peg to weak dollar fuel Gulf inflation

0 Comments | AFP, March, 2008

MANAMA (AFP) — Abundant liquidity, triggered by sharply higher oil revenues, and the effect of currencies pegged to a weakening dollar are fueling inflation in the Gulf region, economists say.

And the situation is so serious that Gulf business leaders will meet in Bahrain on Monday to get advice from the International Monetary Fund (IMF) and the European Union on how to tackle the problem.

"The growth of money supply in Gulf countries has in some cases exceeded 20 percent," leading Bahraini economist Ahmed al-Yusha told AFP this week. "This reflects in (higher) demand, and consequently affects prices."

Gulf Cooperation Council members Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates have been enjoying a windfall of oil revenues on the...