Analysts said GCC investors were not linked to Lehman Brothers. They
said this would avoid an immediate crisis in the Gulf Arab banking system,
particularly in the UAE.
"The Central Bank stated that UAE banks had virtually no exposure to
Lehman Brothers, that there was no systemic risk in the UAE as a result of
the fallout in international money markets," the UAE Central Bank said.
Kuwait plans to launch a $130 billion financial development plan meant
to lure foreign investment. The GCC sheikdom has sought to diversify its
oil-based economy and become a Gulf financial center.
Still, analysts said the global credit crisis could worsen over the next
few months. Standard & Poor's Ratings Service warned of "another large wave
of write-downs in the second half of the current year."
So far, GCC states have already been urged to sever their peg to the
U.S. dollar. The International Monetary Fund said such a move would
facilitate efforts to fight double-digit inflation in Bahrain, Kuwait,
Qatar, Oman, Saudi Arabia and the United Arab Emirates.
"If inflationary pressures were to persist for an extended period,
consideration may need to be given to alternative exchange rate arrangements
that allow monetary policy to be utilized in fighting inflation," IMF
manager director Dominique Strauss-Kahn said.