The GCC should not rush into forming a single currency as member states need to work out the framework for a regional central bank, Saudi Arabia's Central Bank Governor Muhammad Al Jasser said yesterday.

"It took the European Union 45 years to put together a single currency. We should not rush," he told reporters at the ninth Gulf Co-operation Council banking conference in Manama.

Gulf leaders approved an agreement in December to create a central bank and a regional single currency to help boost trade among the members. The heads-of-state agreement still needs to be endorsed by the national governments of the five member states, Saudi Arabia, Kuwait, Bahrain, Qatar, and the UAE. Within the six-nation GCC, Oman has pulled out of the process.

Al Jasser's comments echoed remarks made yesterday by Nasser Al Kaud, deputy assistant general for economic affairs at the GCC.

"Given the preparation and technical requirements that you need for setting up and establishing the central bank, you can't do all these things this year," Al Kaud said in Manama.

The six GCC states agreed in 2001 to form a European Union style monetary union by 2010. Under the terms of the agreement, the members have to meet economic criteria, including inflation rates not exceeding two per cent of a weighted average in the GCC, and an annual fiscal deficit not exceeding three per cent of GDP.

Pressure mounted last year on the GCC members to drop their currency pegs as inflation accelerated above 10 per cent in five of the six countries. All of the member states except Kuwait peg their currencies to the dollar and tend to follow the US Federal Reserve when setting interest rates.

"It's possible to maintain the peg and also have flexibility concerning interest rates," Al Jasser said.

The Saudi Arabian Monetary Agency (Sama), the nation's central bank, had $501 billion (Dh1.84 trillion) under management at the end of last year, up from $385bn in 2007, according to a January 15 report by economists at the Council on Foreign Relations.

"Until now we have not seen anything that makes us worry about our assets abroad," Al Jasser said.

Saudi inflation slowed to 6.9 per cent in February, a one-year low, as global commodity prices fell.

"Monetary stability is essential to send the right message to investors as our imports are mostly in dollars or are from areas pegged to the dollar," said Al Jasser.

He said the kingdom was willing to pay its share in the capital of the International Monetary Fund and was expecting its quota to rise.

Al Jasser said he supports the US handling of the global economic crisis. "We have confidence in what the US is doing," he said.