June 8, 2011 / 12:20 PM / 7 years ago

Oman concerned about U.S. debt default risk: c.bank

MUSCAT (Reuters) - Any U.S. debt default may briefly destabilize Gulf Arab foreign asset reserves, a senior official at Oman’s central bank said on Wednesday.

“We are discussing it within the central bank,” the official told Reuters on condition of anonymity.

“We are concerned about the (risk of) U.S. default and it may briefly destabilize, not only Oman, but the Gulf reserves because our economies are substantially tied up with U.S. financial developments,” he said.

U.S. Republican lawmakers are “playing with fire” by contemplating even a brief debt default as a means to force deeper government spending cuts, an adviser to China’s central bank said on Wednesday.

Gulf states like Oman, which mostly peg their currencies to the U.S. dollar, are major holders of Treasuries and other U.S. assets, with oil — priced in dollars — their major source of revenue.

Central bank officials in Saudia Arabia, United Arab Emirates, Kuwait and Qatar were not immediately available for comment. Bahrain’s central bank declined comment.

UAE central bank governor Sultan Nasser al-Suweidi said last week Gulf Arab central banks still regard U.S. Treasuries as a safe investment and there was no change in their policies.

Central banks in the Gulf, the world’s top oil-exporting region, usually do not disclose a detailed composition of their foreign currency reserves.

The UAE central bank said last year it holds nearly all of its foreign exchange reserves in U.S. dollars with only small amounts of other currencies such as the Japanese yen.

Reporting by Saleh al-Shaibany; Writing by Amran Abocar and Martin Dokoupil; Editing by Ruth Pitchford

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