Kuwait/Dubai: Gulf states are considering dropping their pegs to the dollar after the US currency’s decline stoked inflation across the region, Kuwaiti finance minister Mustafa al-Shimali said.

“Yes, there are some’’ Gulf Cooperation Council states considering dropping their pegs to the dollar, which has fallen 13% against the euro in the last year, al-Shimali said in an interview in Kuwait on Wednesday.

“Some countries will do what we are doing.’’

Al-Shimali didn’t say which countries might end their pegs. Speculation of a change in Middle East currency systems eased this month after the United Arab Emirates and Qatar ruled out a revaluation or dropping the dollar peg. Inflation is running close to 10% in Saudi Arabia and the UAE, while Qatar’s consumer prices rose 14% in the fourth quarter.

The Kuwaiti dinar has appreciated 7.9% against the dollar since the nation dropped its peg to the US currency in May last year. The link to the dollar meant that imports in euros and other currencies that have strengthened against the dollar became more expensive.

“Inflation is rising in the Gulf to a great extent because of loose monetary policy,’’ said Marios Maratheftis, head of research for Standard Chartered Plc in the Middle East.

“Tightening monetary policy can only happen if they drop their currency pegs or strengthen the currency, preferably both.’’

The UAE and Qatar lowered their benchmark interest rates on Thursday by a quarter-point, matching a cut by the US Federal Reserve. The move is needed to maintain the dollar pegs.

Source : DNA