Last month, the governor of Kuwait’s central bank, Sheikh Salem Abdelaziz al-Sabah, announced that his national currency would no longer be pegged to the US dollar. It was a shock decision that has cast a dark shadow of doubt over the region’s already fading hopes to establish a monetary union by 2010. Kuwait’s sudden move to put an end to the fixed exchange rate between its dinar and the greenback, a peg which had been in place since 2003, was a case of weighing national interests above regional ones. Inflation in the tiny Gulf state has been rising steadily in the past two years and recently hit 5%, a trend that many attribute largely to the weakness of the dollar and the resulting “imported inflation” effect. By pegging its dinar to a basket of currencies, Kuwait hopes that price rises will cool off and its central bankers will be able
