Arab Monetary Fund urges Gulf to drop pegs-paper

DUBAI, Nov 30 (Reuters) - The Arab Monetary Fund has called on Gulf Arab states to drop their pegs to the tumbling U.S. dollar, saying revaluations would not solve the problem of soaring inflation, a Dubai newspaper reported on Friday.

Emarat al-Youm reported that Jassem Al-Mannai, chairman of the Arab Monetary Fund, had said he had advised Gulf countries to follow one of two policies. These were either a managed float or pegging their currencies to a basket. The newspaper gave no direct quotation for this.

Revaluations alone will not solve the problem, the paper quoted Al-Mannai as saying. "It will not be in the interest of Gulf countries and it will not help solve the problems that they are facing," he said.

"It will not give these countries the freedom to fight the inflation which is posing a growing threat on their economies."

The United Arab Emirates called this month for all Gulf oil producers to switch from fixed exchange rate to currency baskets. Saudi Arabia had signalled it could consider revaluating its currency for the first time in 21 years without dropping its peg.

(Writing by Summer Said; Editing by David Stamp)