GCC to reconsider 2010 currency plan

Dubai: Gulf Arab oil producers will reconsider a 2010 target for monetary union at an autumn meeting as soaring inflation and rapid economic growth hinder the single currency plan, Saudi Arabia's central bank governor said.

Hamad Saud Al Sayyari said 2010 is "too soon" as Gulf economies surge on a near seven-fold rise in oil prices since 2002 and inflation jumps to record highs.

"2010 is too soon and therefore it is a big challenge," Al Sayyari told Al Arabiya television.

"The programme will be discussed and reconsidered at a joint meeting with finance ministers this aut-umn," he said in remarks aired on Tuesday.

Joint central bank

Central bankers from Saudi Arabia and four of its neighbours agreed at a meeting this month to create the nucleus of a joint central bank next year, but signalled the new common currency would not be in circulation by the agreed 2010 target.

The governors are set to meet with Gulf finance ministers to approve a final draft of the monetary union deal this Sep-tember. They will also discuss a draft agreement to set up a monetary council that will be the first leg of a central bank.

But while there is impetus from Gulf Cooperation Council (GCC) member states to push forward the project, economic conditions - particularly inflation - are slowing it down, Sayyari said.

"Everybody is in agreement about the seriousness of the project and its importance," Sayyari said.

"But because the region is passing through an abnormal phase in economic activities and an increase in inflation ... achieving this target is very difficult."

UAE Central Bank Governor Sultan Bin Nasser Al Suwaidi said this month skyrocketing prices had led to disagreements about the launch.