Oil needs to fall a long way before Gulf’s pegs are at risk

Oil prices have now fallen well below the level needed to balance current accounts across much of the Gulf, which may raise concerns about the sustainability of the region’s dollar pegs. And, indeed, there are some tentative signs of pressure on pegs. With large foreign assets to hand, fixed exchange rate regimes are unlikely to break anytime soon. But governments will need to tighten fiscal policy to stabilise balance of payments positions, which will weigh on growth.