ABSTRACT
The Gulf Arab renter development model is predicated on a pact with its citizens; its currency policy choices have often reflected this grand bargain and the interests of key stakeholders like national business, imported labor, and geopolitical interests. This chapter examines the political economy rationales of Gulf Arab currency policies and argues against de-pegging against the dollar. Qatar and the Crucial States abandoned the Gulf rupee in 1966 but did not yet issue their own currencies: Abu Dhabi adopted the Bahraini Diner while the other emirates adopted the Saudi Riyal. The credibility and reputation of monetary instruments is a key component of the relationship between the citizen and the state. The effort at establishing a common currency and the rigid dollar peg have been criticized and ridiculed by analysts for an approach that is purely economic and void of political considerations.
