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Thu 12 Mar 2009 12:23 PM

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GCC monetary union target 'needs revisiting'

Bahrain's Central Bank governor casts doubt over 2010 deadline for proposal.

The governor of Bahrain's Central Bank on Thursday said the GCC states might have to rethink their 2010 target for a monetary union.

Rasheed Al Maraj said: "We will have to revisit this timing", adding that he saw no problems with legal ratification of the proposal.

Bahrain is one of five states, along with Saudi Arabia, the United Arab Emirates, Kuwait and Qatar, that is working towards launching a single currency by a 2010 target date set in 2001.

He also said Bahrain was looking at issuing bonds and treasury bills, including sukuks, to help bridge possible deficit in the Gulf state's 2009 budget which has still be be finalised.

The governor also predicted that banks in Bahrain would start lending soon although not at levels previously seen during 2008 before the global economic crisis took hold.

"Bahrain is not facing a crisis of liquidity. There is no pressure on liquidity, no erosion of capital," he said on the sidelines of the Wharton Global Alumni Forum in Dubai.

He added that many banks in the Gulf state were currently depositing funds with the central bank instead of lending to the public.

"This crisis has revealed the importance of economic integration of the GCC. We need a broader market," he added.

To encourage lending, Bahrain has cut interest rates and reduced cash reserve requirements for banks.