Gulf central bankers will face pressure at a meeting in Muscat to specify an alternative timetable for rolling out a single currency as markets become increasingly sceptical about the project's viability.

The Gulf Cooperation Council (GCC) last month gave its first official acknowledgement that issuing common notes and coins will take longer than the 2010 target agreed on eight years ago.

But as regional policymakers focus on the more pressing concern of shoring up their economies and banks against the global financial crisis, some analysts wonder if the project could be left to languish for many more years.

Decisions on the location of the Gulf central bank and when it will start operating remain undecided as central bank governors from Saudi Arabia and five other oil exporters gather for a twice yearly meeting in the Omani capital today and tomorrow (April 6 and 7).

'The comments that we saw last month seemed to confirm that it is being delayed. We're likely to see that formally stated at the summit,' said Simon Williams, regional economist at HSBC.

'If at the end of summit we don't see some evidence of progress, the market is likely to conclude that the project has been allowed to lapse, not merely been delayed.'    

The monetary union plan, part of a wider project to create a regional common market including a customs union, has lost credibility in the last three years after Oman decided not to join and Kuwait severed its dinar's peg to the dollar.

In 2001, the GCC had agreed to keep pegs intact until a single currency comes into force.

In the past year, Gulf central bank governors have insisted that monetary union is back at the top of their agenda. The region's leaders signed key monetary union accords in December and governors have said they hope to name the currency and decide on the convergence rate by the end of the year.

Yet the oil exporters have adopted separate policies to tackle the global crisis that ended a six-year oil-fuelled boom.

 'This is an occasion to focus on the benefits of monetary union because it would enable a more coordinated response with common policy tools.' said Nasser Al-Saidi, chief economist at the Dubai International Financial Centre.

Monetary union has in many ways become more urgent as Gulf states face the worst global financial crisis in 80 years and oil prices collapse nearly $100 a barrel since a peak last July.

One way they could shield themselves from US economic problems is by pegging the Gulf currency to a basket of major currencies rather than tying their fate to the dollar.

Monetary union could also help them develop regional money markets, giving them more tools to affect monetary policy by intervening in buying and selling securities.

'I think the difficulties the Gulf is experiencing strengthen the case for monetary union but arguably make it more difficult...because the outlook is so uncertain,' Williams said.

The key hurdle facing Gulf monetary union is building institutions and securing the political will to push it through. The six convergence criteria, such as achieving a public debt ratio of less than 60 percent, have mainly been met.

Gulf inflation rates have fallen more in line recently and a joint central bank will not target an official inflation rate. Still, questions linger over how much monetary policy power the autocratic states will yield to their common central bank.

'The institutional setting that is necessary to credibly uphold a viable monetary union is virtually non-existent,' Goldman Sachs analyst Ahmet Akarli said in a note last month.

He called the project's success 'highly unlikely'. 'In fact, we believe that monetary policy frameworks throughout the GCC are more likely to diverge over time, in line with va