The conception of a unified currency system can be termed as an explicit aspiration of the Gulf Corporation Council (GCC) countries. Dar and John (2001; 1172) affirms that the above goal was formally declared following the foundation of the GCC in the Article Twenty-Two of the Council’s Unified Economic Agreement of June 1982, which ascertains that “The member state shall seek to coordinate their monetary, financial and banking policies and enhance corporation between monetary agencies and central banks, including endeavor to establish a common currency order to further their desired economic integration.” In regards to above position this proposal will thus examine the challenges of economic Integration and currency unification by the GCC countries (Low, & Lorraine, 2011; 11).
In examining the challenges, the paper will also look at the advancements that have been made by the GCC member states. It is clear that in 2005, the GCC members adopted the EU convergence criteria with respect to budget deficit, currency reserves, public dept, inflation and interest rates. Fulfillment of most of the convergence criteria has been achieved; however, there are certain areas that the GCC countries still face a lot of challenges.
Therefore, this proposal will examine a number of challenges such as: slow progress towards integration process, long economic viability, and heavy reliance on oil revenues among other challenges (Popesku & Mustafa, 2001; 38). This paper will also highlight on some of the causes of the slow pace for economic integration such as: incompatible development strategies, loss of sovereignty, possible losses, strong or established economic linkages with the EU, US and Japan, evolving public-private economic mechanism, and economic shocks (Salem, 2010; 169).
Finally, the paper will conclude by looking at a number of ways of addressing these challenges. Nonetheless, we must admit that the losses associated with integration, however still exist; they are not likely to offset the benefits.
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