The central banks of Saudi Arabia, Bahrain, Qatar and Kuwait are preparing to liquidate loans granted to public sector bodies as a prelude to the launch of the Gulf single currency, Al-Riyadh daily reported on Saturday. The paper cited sources from the Gulf region who did not reveal the size of these loans. Saudi Arabia, Bahrain, Qatar and Kuwait are the four Gulf Cooperation Council (GCC) states that have signed the Gulf monetary union agreement. The move comes after the GCC monetary agreement prohibited lending to public sector entities by national central banks and by the GCC central bank that will be established in Riyadh, the sources told the daily. The GCC central bank and national central banks are not allowed to directly buy securities or debt instruments issued by public sector bodies, but they are allowed to buy these instruments on the secondary market in the framework of open market operations and they are also allowed to accept these instruments as collateral, Al-Riyadh reported, citing the GCC monetary union agreement. Meanwhile, Gulf economies will rebound next year, with all recording positive growth as regional inflation slows, according to a survey. The fastest expansion in the region will be recorded by Qatar, the world's largest liquefied natural gas exporter, which will post 15 per cent growth next year, according to the median estimate of six economists contacted by Bloomberg and the International Monetary Fund. Gulf states have been using savings to help cushion the impact of the worst global recession since World War II. Qatar, Bahrain, the UAE and Oman also have either issued sovereign bonds or are looking to float bonds to fund expansionary spending and support companies. Saudi Arabia, the world's largest oil exporter, will record 4.7 percent economic growth next year after the economy shrinks 0.9 percent this year, according to the median estimate of the survey. The kingdom has announced a spending package that will be the largest of the G20 countries, as a percentage of gross domestic product, according to the IMF. The economies of Oman, Bahrain and Qatar will be the only to grow this year in the GCC while Saudi Arabia, Kuwait and the UAE face contractions, according to the forecasts. Inflation is expected to slow across the GCC after reaching more than 10 percent in five of the six GCC countries last year. EFG-Hermes and the National Bank of Abu Dhabi are predicting deflation in the UAE, where the median inflation estimate stands at two percent this year and three percent next year. Saudi Arabia, Qatar, Oman and Kuwait will see inflation of five percent or more this year. Real estate prices across the region have dropped as the global credit crunch set in. The dollar, to which all the GCC countries are pegged bar Kuwait, has also strengthened, easing the costs of imports. The drop in global commodity prices has also brought down the cost of food in the region. Economists from EFG-Hermes, Samba Financial Group, Jadwa Investment, Standard and Poor's, National Bank of Abu Dhabi and Standard Chartered took part in the survey, which includes data from the IMF website. - SG/Agencies The UAE passed this week a public debt law that caps federal borrowing and forces government entities to seek cabinet approval before taping credit markets. The law, passed Wednesday by the Federal National Council, limits federal debt to 45 percent of the country's gross domestic product or caps it at AED300 billion dihams ($81.7 billion), whichever amount is less, according to a statement on the official Emirates News Agency, or WAM The law comes at a time when governments around the oil-rich Gulf are issuing bonds to fund their budgets after oil plunged from all-time highs last year.