GCC Currency Peg

Executive Summary

What is the report about?
The report discusses about the current currency regime existing in the GCC, and the reasoning behind their adoption of the peg. It also elaborately talks about the pain points for currency peg from the angle of GCC countries and checks the resilience of the pegs in adverse economic conditions. The report also analyses whether de-pegging would be beneficial to them and the adequacy of foreign reserves of individual GCC countries to defend the peg in the next five years.

Who will benefit and why?
The report will benefit anyone who seeks clarity on the currency regime in the GCC and get an idea about the benefits and shortfalls of maintaining the currency peg. It would be beneficial for the players who are involved in the import and export business whose transaction values depend of the exchange rates. It would also benefit players involved with Central banks and policy makers in taking policy decisions.

How exhaustive is this report?
We have analyzed the factors which led to GCC countries pegging their currencies to the US dollar along with its merits and demerits in the current macroeconomic climate. We have discussed the factors that threaten the peg and whether the GCC countries would be able to withstand any attacks on their currency. We analyze several factors including the reserve adequacy of individual GCC countries which give a detailed picture of whether they are well-equipped to defend their pegs. We have discussed on the implications of maintaining and doing away with the currency peg and provided an outlook on what would be the way forward for GCC countries.