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Undervalued currencies
Mar. 12th, 2008 11:39 amYou may have noticed that the dollar is doing pretty badly lately. Here in Qatar we definitely notice that the dollar is doing badly, because our currency is pegged to the dollar, but most of our trade partners operate in euros or yen. As a result of that and the housing crisis, inflation is currently at around 14%, and the Qatari riyal is believed to be undervalued by as much as 30%.
You know who this sucks for? Workers. They still get paid the same amount in riyals, but suddenly that's worth a whole lot less in rupees. According to the Middle East Economic Digest (cited here), five years ago an Indian construction worker could earn four times as much in Dubai as in India; today, "the pay differential has been reduced to 40 per cent." Apparently this makes manual laborers much less excited about taking jobs in the Gulf -- possibly the only good thing to come out of this monetary crisis.
Last month Alan Greenspan told Qatar they should depeg, and word on the street is that they might do so as soon as April.
You know who this sucks for? Workers. They still get paid the same amount in riyals, but suddenly that's worth a whole lot less in rupees. According to the Middle East Economic Digest (cited here), five years ago an Indian construction worker could earn four times as much in Dubai as in India; today, "the pay differential has been reduced to 40 per cent." Apparently this makes manual laborers much less excited about taking jobs in the Gulf -- possibly the only good thing to come out of this monetary crisis.
Last month Alan Greenspan told Qatar they should depeg, and word on the street is that they might do so as soon as April.
