The launch of Middle East's first currency union could be delayed beyond its initial schedule at the start of 2010 because of a large gap in inflation and other factors, according to a Kuwaiti bank.

The widening gap in inflation rates could ally with economic divergence and lack of fiscal discipline to block efforts by Gulf oil producers to create the landmark monetary union on time despite progress in years of negotiations, the Emirates Business reported citing a study by National Bank of Kuwait (NBK).

Even after its creation, the GCC countries could still face obstacles in maintaining the monetary union in the long term as their varied oil resources could create economic divergence and some members could fail to abide by fiscal discipline, it said.

"We find two possible economic obstacles in both forming and maintaining a well functioning GCC monetary union," NBK said in the study about the currency union.

"The first is cyclical in nature. The economic boom that started in 2003 coinciding with the rise in oil prices has dramatically increased the rate of inflation throughout the region. Moreover, there has also been a growing gap in inflation rates between member states."

"Regions with disparate rates of inflation are not ideal grounds for monetary union because member states may require different levels of interest rates to moderate inflationary pressures."

The report described the second obstacle as "secular and longer term in nature" because of what it called their large differences in hydrocarbon resources.

According to the study, inflation in the six-nation GCC, which controls nearly 45 per cent of the world's oil, has remained relatively low and under control before it began to spiral over the past few years due to an economic boom caused by a sharp increase in oil prices and massive public spending.