Gulf states should implement a monetary union and single currency in phases, Kuwait's central bank governor said, casting further doubt on a 2010 target date.

'Due to the limited progress achieved so far... I believe that the best way is to work out an administrative plan for the monetary union and single currency and implement it in stages,' Shaikh Salem Abdulaziz Al Sabah told Awan newspaper.

The GCC plans to launch monetary union and a single currency next year, although many experts believe the target date is too ambitious and unrealistic.

Kuwait was one of four GCC members which in June signed an accord to create a joint monetary union council, a prelude to establishing a Gulf central bank and launching monetary union and a single currency.

Saudi Arabia, Qatar and Bahrain also signed the pact, while the remaining two members, the UAE and Oman, did not.

The UAE was upset at the Saudi capital Riyadh being selected to host the future GCC central bank, while Oman withdrew from the monetary union in 2007 saying it was not ready to meet the preconditions.

Shaikh Salem said the administrative plan should focus on the institutional requirements of the union including financial, trade, statistical and common market policies. The governor said Kuwait has no plan at the moment to revert to pegging the dinar to the dollar, more than two years of linking it to a basket of international currencies.

'At this moment, we don't see a need or benefit to abandon our policy of pegging the dinar to a basket of currencies,' he said.

Shaikh Salem said he expects inflation in the emirate to drop below 5 per cent this year from over 10 per cent last year.