dubai — The crisis currently encircling global financial markets may get worse, according to the director-general of the International Monetary Fund (IMF) Dominique Strauss-Kahn.
Speaking in Jeddah after a meeting with Gulf Cooperation Council (GCC) central
bankers and finance ministers he was quoted by Reuters as saying: ‘It is a very
serious financial crisis. The consequences for some financial institutions are
still in front of us’.
He added: ‘We have to expect that there may be in the coming weeks and coming
months other financial institutions with some problems’.
Analysts took his comments as a warning of further turbulence in the financial
system as regulators struggle to contain the shock waves from the collapse of
Lehman Brothers. The IMF chief also said inflation and interest rates in GCC
states need to converge before a single currency is launched.
‘I am concerned about the convergence on the inflation rate,’ Strauss-Kahn told
reporters. ‘To have a single currency you should have convergence in the
inflation rate and the interest rates and we don’t have either of these
today.’The GCC single currency is due to be launched in 2010.
Oman pulled out of the planned single currency last year. The finance minister
of Qatar, Yousef Kamal urged the six members of the GCC to speed up economic
integration. Addressing GCC finance ministers he said that without a common
stock market and a single currency the region may not be able to weather
financial storms in the future. Finance ministers on Wednesday approved with no
change a draft agreement on monetary union without agreeing on the location of
the planned monetary council.
In a separate development the Government of Dubai intervened to assist stranded
Lehman staff in Dubai.
The Governor of the Dubai International Financial Centre, Dr Omar bin Sulaiman
commented: ‘No one will be asked to leave or even face deportation. An uneasy
calm returned to global markets on Wednesday as news of the massive loan of the
US$85 billion to AIG by the US government lessened investor’s anxieties.
In the UK HBOS confirmed it was in takeover talks with Lloyds TSB to create a
banking giant worth £30 billion.