RIYADH • Gulf Arab countries are on track to adopt a single currency in 2010 and establish a monetary union, a Gulf official said on Tuesday.

“At a meeting in Abu Dhabi a few days ago the issue was discussed in detail, concerning its look, denominations, and even its name,” Abdul-Rahman Al Attiya, secretary-general of the Gulf Cooperation Council (GCC), told a news conference.

“Now we have moved from the stage of establishing the criteria to the stage of implementation, paving the way for issuing the single currency in 2010 and setting up the monetary union,” he told reporters after a meeting of GCC foreign ministers in the Saudi city of Jeddah.

The GCC, a political and economic alliance grouping Saudi Arabia, the United Arab Emirates, Kuwait, Qatar, Bahrain and Oman, has already set up a customs union.

GCC officials say the criteria must still be approved by finance ministers before heads of state ratify the plans.

The monetary union criteria would involve levels of government debt, government deficit, inflation, interest rates and foreign currency reserves.

“We need a mechanism to monitor compliance over the next three years. That is the main challenge, as well as the issue of political symbolism,” one Gulf economic official said.

The six nations face awkward decisions affecting individual state sovereignty on issues such as where to house a central bank overseeing the single currency, economists say.

The UAE wants to host it in Abu Dhabi, though Saudi Arabia is the largest GCC state.

Most of the six peg their national currencies to the US dollar. Kuwait’s dinar trades in a narrow band and the UAE plans to convert 10 per cent of its mostly dollar-denominated currency reserves into euros and gold.

The pegs have been criticised during previous spells of dollar weakness for fuelling inflation by driving up the cost of imports denominated in other currencies.

They also mean that regional monetary policy is effectively set in the United States on priorities that are very different to those of the booming economies of the Gulf, where currencies are under upward pressure as cash from oil exports pours in. “The obstacles must be got over and hopefully they will be, despite what is sometimes said about the GCC being slow,” Attiya said. “In general the process is moving in the proper fashion.”