GDRG Home

THE GOLD DINAR RESEARCH GROUP

Gold Dinar introduction should be gradual

UTUSAN EXPRESS 23/10/2002

KUALA LUMPUR Oct 23 - The International Seminar on "Gold Dinar in Multilateral Trades" which concluded today has recommended that the gold dinar be introduced gradually.

For a start, it could be used to facilitate trades among countries that Malaysia has Bilateral Payment Agreement (BPA), said chairman of the Institute of Islamic Understanding Malaysia Tan Sri Ahmad Sarji Abdul Hamid when deliberating the highlights and recommendations at the end of the two-day seminar.

It is imperative to adopt the gradual approach of introducing gold dinar in order to preserve the stability of the existing system, he said.

Prime Minister Datuk Seri Dr Mahathir Mohamad who closed the seminar, said that Malaysia will consider setting up a secretariat to explain the concept of using the gold dinar for settlement of international trade.

Other recommendations were that the central banks of two participating countries involved in bilateral trade open their respective gold reserve accounts with a custodian bank.

Importers and exporters between the two countries will continue to make and receive payments to and from their respective central banks in their respective local currencies.

Settlement using gold dinar will only be carried out at the central bank level involving periodical transfer of gold reserve accounts in the custodian bank.

With regards to gold dinar, the central bank will take play three roles namely the developmant role, payment agent and custodian of external reserves.

With regard to the adequacy of gold to facilitate the use of gold dinar in international trades, due to the nature of the settlement mechanism, a minimum amount of gold dinar will be required to settle the trade balances between two countries.

The usage of minimum amount of gold dinar would enable countries that do not have a large amount of foreign exchange reserves to participate in the trade.

On issues that require further studies, Ahmad Sarji said the implementation of the gold dinar proposal must see that it is riba free and syariah compliant, strong and stable.

There is an existing prohibition by the International Monetary Fund (IMF) on the use of gold as a medium of payment.

Hence, the proposed gold dinar is a potential violation of the rule.

There is a need to study the effects of using dual-currency system (gold dinar and existing currencies) on the development of gold dinar.

Due to the relatively small volume of trade among Organisation of Islamic Conference (OIC) countries, the development of gold dinar could be impeded by the existing currencies.