A planned joint Gulf central bank will be independent from the governments of its member countries, according to the latest draft of the planned monetary union agreement to be discussed on Tuesday, a source said.

Finance and foreign ministers from the six oil-exporting members of the GCC will meet in Muscat on Tuesday to hammer out a final statement for leaders to sign at a meeting in December.

In September, Gulf Arab finance ministers approved the framework for their monetary union but left questions over the timing of the launch of the single currency unanswered.

They also left doubts lingering over the independence of a future common central bank and deferred a decision over its location to next month's leaders summit. The latest draft addressed the issue of independence.

'The central bank will be established to replace the monetary council. It has a complete legal independent personality,' a senior GCC official said, reading a copy of the draft to Reuters.

'All the GCC bodies, including the government bodies, are forbidden from giving any directions to the GCC central bank or the national central banks or any of their executive members for the sake of influencing its performance.'  The GCC official declined to be identified because he is not authorised to speak to the media.

GCC finance ministers last met in October, when they discussed their response to the global downturn that has put a brake on the region's six-year oil-fuelled boom.

They said at the time that the turmoil gave new urgency to a long-standing plan for a monetary union. The GCC launched its monetary union plans in 2001 but progress has been hampered by setbacks.

An Omani economy ministry official said on Tuesday that the ministers would discuss at their meeting a possible one-year delay to the implementation of a planned customs union.

'A few issues still remain with the customs union, including the collection and distribution of customs revenues,' Abdul Malik al-Hinai, undersecretary of economic affairs at Oman's economy ministry, told Reuters. 'We are discussing extending the transitional period by one year to the end of next year.'

Inflation has been the key challenge as Gulf states struggled to meet convergence criteria amid soaring prices.

Most Gulf states fix their currencies to the dollar, which forces them to track U.S. rate cuts even during economic booms.
Oman has already left the monetary union project and Kuwait threw the plan into doubt when it dropped its dollar peg.

Inflation has started to show signs of easing in recent weeks as oil prices dropped to below $50 a barrel from highs of almost $150 a barrel in July and on a dollar recovery.

'The objective of the central bank under the agreement is to maintain price stability in the single currency area within the framework of optimal utilisation of economic resources with the aim of maintaining economic stability,' the official said.

He said national central banks would supervise their own banking system but would coordinate with the GCC central bank.

The joint central bank would be preceded by a joint monetary council to help the transition although the draft did not give a specific timeframe for how long the transition phase might take.

The unified monetary authority cannot be established until the five countries taking part have all ratified the agreement.-Reuters