Efforts to establish a unified currency among the Gulf Cooperation Council (GCC) member states face significant structural and political obstacles, according to economist Hajjaj Bukhadhour. While the idea of a common Gulf currency remains theoretically feasible, its success hinges on extensive economic integration that extends far beyond merely issuing new currency notes.

Bukhadhour stressed that the adoption of a unified currency requires the creation of a centralized monetary authority—a single central bank tasked with managing interest rates and currency issuance across all GCC countries. This would necessitate member states ceding a portion of their monetary sovereignty, a complex undertaking given the varying economic priorities, inflation rates, and growth trajectories among the states.

He emphasized that a unified currency would function effectively only if accompanied by harmonized fiscal policies. This includes establishing consistent budgetary frameworks with enforceable limits on budget deficits and public debt to prevent excessive borrowing by individual states from undermining the currency’s stability. Bukhadhour cited the European debt crisis as a cautionary example of the risks inherent in insufficient fiscal coordination.

Further integration would require the development of a coherent financial system that aligns the regulatory and legislative frameworks governing banking and capital markets in the GCC. Additionally, synchronizing economic policies to accommodate the differing structures of member economies—such as the distinction between oil-producing and non-oil-producing states—is critical to managing economic cycles and ensuring parity.

Bukhadhour warned against viewing a unified currency simply as a payment instrument, portraying it instead as the culmination of deep economic alignment. Ignoring the necessary institutional prerequisites and rushing into currency union could exacerbate economic disparities and provoke financial instability, undermining the project’s stated development goals.

To facilitate a successful transition, Bukhadhour outlined a series of measures, including binding fiscal rules and the establishment of a financial stability fund. He also suggested leveraging the GCC’s advanced technological infrastructure by exploring Central Bank Digital Currency (CBDC) initiatives as a preliminary step to improving interstate financial settlements and lowering associated costs.

However, Bukhadhour acknowledged that political challenges represent some of the most difficult barriers to overcome. Key issues include negotiating the distribution of influence and voting rights within the central bank, deciding the location of its headquarters, managing monetary reserves, and allocating burdens related to economic crises.

In conclusion, Bukhadhour noted that a Gulf unified currency would only represent a net benefit if the advantages of integration surpass the loss of monetary independence. For this to be achievable, he argued, robust joint institutions must be established in advance of any currency launch, rather than as a reactive measure afterward.