Central Bank of Oman executive president Hamood al-Zadjali looked relaxed when he confirmed the sultanate's government had decided against joining.

Acting as spokesman for the other four, Saudi Arabian Monetary Agency (Sama) governor Hamad al-Sayari said currency union in 2010 was backed by all GCC heads of state. Work was continuing on how it would function, including the form of the central banking authority.

Delegates listening to the governors were no clearer about the future of GCC monetary union at the end of the session than they were at the start. None of the six said the project was dead or that the 2010 target date would be missed. But there were no ringing endorsements for the Middle East's most ambitious economic project.

GCC leaders agreed to currency union at their summit in Muscat at the end of December 2001. Oil prices then were below $20 a barrel, less than a third of their average in May 2007. GDP in the GCC has doubled to more than $700,000 million. This year, the region will record another astonishing balance of payments surplus. In the past half decade, the GCC has been the world's fastest-growing region.

Back in 2001, anyone forecasting such developments would have been denounced as a lunatic. When the GCC summit approved currency union, it was just three months after 9/11 and a month after Afghanistan had fallen to the US-led coalition. The oil price had slumped in anticipation of the economic setback most expected would ensue. GCC currency union offered collective economic security in a world that appeared to be about to go mad.

The radical change in circumstances since then constitutes grounds for a thorough review of the currency union plan. The 2010 deadline has been in trouble since Oman announced it was dropping out. Kuwait's decision to end the dollar peg is the second nail in its coffin.

Uncertainty is now driving the region's currency markets. Speculators are capitalising on arbitrage opportunities emerging between GCC currencies and the dollar, and among the region's currencies themselves. To restrain upward exchange rate pressure, the region's banking authorities are accumulating dollar reserves, thereby inflating the volume of Gulf money in the hands of international investors.

It is a recipe for monetary instability and surely cannot continue. The GCC should announce that currency union remains the long-term goal, but 2010 is not the target date.

There are economic arguments for and against the single GCC currency. But inflation imported into the region because of the depreciation of the US currency, the reason why Kuwait has dropped the dollar peg, is not fatal to the project.

Inflation, in double digits in some GCC states, requires a response. Selective GCC revaluations against the dollar make sense. But none of this suggests a single GCC currency is impossible. Done properly, it will underpin what could in 25 years be the sixth largest economy on earth. But the original plan for currency union is beyond redemption. There needs to be a fresh beginning.

Three steps are required. First, GCC leaders should deliver a clear statement that they are irrevocably committed to promoting GCC integration. Second, there is a crying need for a long-term GCC economic strategy encompassing monetary policy, finance market regulation and exchange rates. Third, the GCC needs a plan setting out in det