Yemen to resume oil exports from Shabwa to help stabilise riyal

Yemen's government plans to export oil from Shabwa and channel funds to the Central Bank in a further bid to stem the slide of the Yemeni riyal and protect the economy from collapse, Yemeni economists told Al-Mashareq.

This plan comes in conjunction with a Saudi deposit of $200 million into Yemen's Central Bank on October 3rd, which has shored up the Yemeni riyal against foreign currency, they said.

In January, Saudi Arabia deposited $2 billion into Yemen's Central Bank, which is based in the temporary capital of Aden, to try to shore up the Yemeni riyal.

The Yemeni riyal has lost more than two thirds of its value since March 2015.

Earlier this month, Yemen's Central Bank raised interest rates on deposits to an all-time high of 27%, after the Yemeni riyal slid more than 36% since January, AFP reported.

The slide has seen a sharp rise in food and fuel prices that triggered protests across the south in early September, and prompted the government to raise public sector salaries by 30%.

"The $200 million Saudi grant deposited in the bank's account on October 3rd is an urgent intervention to stop the deterioration of the Yemeni riyal," Central Bank governor Mohammed Zammam said at an October 11th press conference.

"The government is about to begin to export oil from Shabwa province and transfer the funds to the Central Bank in Aden," Zammam said, speaking from the Central Bank headquarters in Aden.

This is in addition to the revenue generated from the export of oil from the Masila oil field in Hadramaut, he said, which is estimated at about $150 million every two months.

Of this amount, $30 million goes to the operational budget of the PetroMasila oil company; Hadramaut province receives more than $20 million; and $50 million covers fuel for power generation in Aden and surrounding areas, he said.

Temporary stability

"The recent Saudi grant had a positive impact on exchange rates and has calmed the banking market," Studies and Economic Media Centre president Mustafa Nasr told Al-Mashareq.

The measures implemented by the Central Bank, including the provision of letters of credit for the import of basic food items and raising the interest paid on deposits to 27%, "will have a clear impact in the coming months", he said.

"The positive impact the Saudi grant has had is similar to the impact made by the $2 billion deposit at the beginning of the year, which brought temporary stability," he said.

It is important that all Arab coalition countries provide support to help stabilise the riyal, he said, noting that the Iran-backed Houthis (Ansarallah) depleted the foreign currency cash reserves during the first year of the war.

After the Houthis seized the Central Bank in Sanaa, they squandered the foreign currency cash reserves, prompting Yemeni President Abd Rabbu Mansour Hadi to relocate the Central Bank to Aden.

This was a direct cause of the deterioration of the Yemeni riyal against hard currencies, Nasr said.

"The government's resumption of oil exports from Shabwa province and the Masila oil field will boost foreign currency revenues to the Central Bank's treasury," economist Abdul Jalil Hassan told Al-Mashareq.

This will enhance the Yemeni Central Bank's ability to control the banking market and fight currency speculation, he said.

Hassan called on the Yemeni government to work towards resuming the export of liquefied gas from Shabwa province and oil from Marib province.

This would "restore to the bank its leading role in maintaining the stability of the Yemeni riyal and thus prevent the collapse of the economy", he said.