The Central Bank of Yemen recently announced it has taken a series of decisions that will stabilise the banking market and secure the import of basic foodstuffs.
The decisions were announced following an April 12th meeting in Aden of the Central Bank's board of directors, with representatives of banks, the Chamber of Commerce and Industry and the private sector in attendance.
The decisions, pursuant to the $2 billion deposit provided by Saudi Arabia, will establish lines of credit for the import of basic commodities including wheat, rice, sugar, milk and cooking oil at public banks in all provinces, from June 1st.
The signing ceremony for the Saudi deposit was held in Riyadh on March 15th, between Saudi Finance Minister Mohammed al-Jadaan and Yemen Central Bank governor Mohammed Mansour Zammam, the Saudi Press Agency reported.
On April 14th, Zammam met with representatives of licensed currency exchange companies in Aden to discuss ways to strengthen the relationship between these companies and the Central Bank and protect the stability of the local currency.
Participants agreed to form a committee, under the supervision of the Central Bank, comprising representatives of commercial banks and currency exchange companies.
This committee will meet each month to set the exchange rate for the US dollar.
Participants also agreed to establish a unified system, with rules and controls, to regulate the relationship between currency exchange operators and the Central Bank and address difficulties faced by currency exchange operators.
Zammam said the Central Bank's actions aim to protect Yemen's economy from money laundering, combat the financing of terrorism and alleviate the negative effects of high exchange rates and the price manipulation of commodities.
Financial and monetary stability
The Central Bank's actions are "positive", but their success is contingent upon an environment where the bank operates independently, Studies and Economic Media Centre president Mustafa Nasr told Al-Mashareq.
"[Arab] coalition countries made a commitment to the Central Bank to facilitate the opening of letters of credit for the bank with Gulf and international banks and provide it with financial, technical and technological support," he said.
The bank's decision to re-open lines of credit for the import of basic foodstuffs at a special exchange rate for the dollar effectively restores some measure of subsidy for the import of basic food items, he said.
"This will create a disparity between the dollar exchange rate and subsidised exchange rate for the import of commodities," Nasr said.
"There is no longer a need for the subsidised exchange rate, but rather a need to make ... the dollar available at market price," he said.
Efforts must be made to control the price of the Yemeni riyal against the US dollar, he added.
With these measures, the Central Bank will be able to foster "financial and monetary stability", Co-operative and Agricultural Credit Bank (CAC) deputy chief operating officer Fares al-Jaadabi told Al-Mashareq.
But these solutions are temporary as they rely on the Saudi deposit, he said, stressing the need to resolve the issue via "a comprehensive political and economic solution".
"These measures are positive [but] temporary, and were taken to create relative financial stability," economist Abdul Jalil Hassan told Al-Mashareq.
"Lasting economic stability will only be achieved by ending the war and finding political and security stability," he said.