Yemen's Central Bank intervenes to boost riyal against foreign currency

Yemen’s Central Bank said Thursday (August 9th) it will directly intervene to stop the deterioration of the riyal against foreign currencies, which has reached record levels.

The bank will inject foreign currencies into the market, with a focus on the commercial sector, in order to put an end to speculations and to ensure stability of commodity prices, Saba news agency reported.

The intervention is part of a "comprehensive plan to reform fiscal policies", the bank said in a statement.

The bank plans to keep the intervention open-ended until "exchange rates return to realistic levels", it said.

On Thursday evening, the riyal exchange rate slightly improved against the US dollar, hitting 550 riyals to the dollar after it had reached 570 on Tuesday.

'Temporary fix'

"Foreign currencies have dropped against the riyal for the second day running," Mohammed al-Mutaher, sales manager at Al-Mutaher Exchange, told Al-Mashareq Thursday.

"Today, we bought the US dollar for 545 riyals, and sold it for 550," he said.

Fluctuations in foreign currencies against Yemen’s riyal will further destabilise the economy as they are followed by fluctuations in food prices, prompting many traders to stop selling their products, he said.

Interventions in the market by the Central Bank are "temporary fixes" rather than effective, long-term solutions, Wujooh Foundation director Mansour al-Jaradi told Al-Mashareq.

"The deterioration of the Yemeni riyal against hard currencies will only end by finding a solution for Yemen’s crisis and ending the war," he said.

"The war is very costly," he said, as it has halted development and production in some of the country's most vital sectors, including the fish and agriculture sectors.

The export of gas, oil and agricultural products has also stopped, al-Jaradi added.

"Continued fighting and the dedication of all resources for the war will make any economic solutions for improving the riyal exchange rate only temporary," he said.