Experts, academics, businessmen and businessmen in Yemen have concluded that the main causes of the deterioration of the local currency exchange against foreign currencies are due to a number of economic and political factors, and other reasons related to the war that raged in the country for more than 6 years.
The specialists and experts said that one of the main causes of the deterioration of the Yemeni riyal exchange rate against foreign currencies is the growing gap between the supply and demand of foreign currencies in the market due to the increase in demand for the currency resulting from the increase in demand for imported goods for reasons, the most important of which is the increase in the population, weak local production, and speculation. In the currency, paralysis in controlling the market due to the weakness of the Central Bank and its division between Aden and Sana’a. Read also In a remarkable development, Yemenis are replacing the coffee tree with the khat tree Yemen: A frightening deterioration of the riyal, deepening the economic and living crisis Shabwa treasure … the UAE and the gas war in southern Yemen Agriculture for livelihood … a haven for Yemenis to face poverty
In addition to this, the ongoing war in the country for more than 6 years, political turmoil, the use of currency and the economy as a means of warfare between the different parties to the conflict, in addition to the negative impact this war had on productivity levels and on investment, which led to a massive decline in the overall social product. To the country’s economy.
Through a remote panel discussion organized by the Economists Association and in which about a hundred experts, researchers, businessmen, and businessmen participated, the specialists saw that stopping the production and export of oil and gas caused the country to weaken its foreign exchange resources, depleted the state’s balance of hard currencies, and lost many foreign exchange resources. Such as the suspension of loans, grants and aid, weak remittances from expatriates, stopping foreign investment, and the outflow of capital due to political unrest in the country since 2011.
Central bank weakness
The specialists went on to say that one of the reasons for the deterioration of the local currency is the failure of the Central Bank of Yemen to carry out its duties in the area of determining the exchange rate and leaving the matter to determine it in favor of the informal market such as exchange shops and institutions, with poor coordination with commercial banks and Islamic banks, as well as the central bank’s abandonment of providing foreign exchange. To finance import needs, and the senior management of the Central Bank – Aden – not carrying out the tasks entrusted to it.
The top management of the Central Bank was divided into 3 departments (the official higher management in Aden, the upper management in Sana’a appointed by the Houthi command authority, and the third in the Ma’rib governorate), thus the absence of a single higher authority and management and one center for decision-making in the field of monetary policy in general and exchange rate policy. Especially, which greatly affects the deterioration of the currency exchange, in addition to the absence of the influence of monetary policy and its tools for interfering in controlling the exchange rate and stopping its deterioration.
The exchange rate of the Yemeni riyal varies from one region to another due to the division of control over the areas between the government and the Houthi group, and the exchange differences constitute a very large percentage, which created a big gap, especially with the imposition of the Houthi militia large fees on money transfers from Aden to Sanaa at a rate of approximately 40%, justified This is because the exchange rate difference is one dollar (900 riyals in Aden and 600 riyals in Sanaa).
The Houthis have also taken a number of decisions, especially after the transfer of the Central Bank administration from Sanaa to Aden, with the aim of putting the government in a position of failure, according to the Dean of the Faculty of Economics and Political Science at the University of Aden, Dr. Muhammad Omar Banaja, as the Houthi group decided not to adopt money from new publications, the matter. Which doubled the issue of speculation on the old printing of money and worked to deplete the old editions from the markets of the areas under the control of the government, which led to a gap in the exchange rates between Sana’a and Aden.
This prompted the legitimate government to flood the market with new critical publications to meet its obligations without judgments, while local and central resources continued to be collected and deposited outside the official channels, thus compounding the deterioration of the value of the riyal in the areas under the control of the legitimate government.
Economists who participated in the discussion believe that creating a kind of reasonable stability in the Yemeni currency’s exchange rate against foreign currencies lies in restoring confidence in the central bank on the one hand, and commercial banks on the other hand, and strengthening the relationship between them and businessmen, by allowing businessmen to access their deposits and withdrawals. From them freely as long as withdrawals within the permissible framework. Advertising
The Director General of Resources at the Ministry of Local Government, Saleh Al-Jafri says that the Central Bank, in coordination with commercial and Islamic banks, must activate the monetary policies necessary to attract foreign currency deposits to the banking system to strengthen the position of the riyal against foreign currencies. One, the revitalization of the banking system under the management of the central bank to control the foreign exchange market.
Experts believe that the country’s foreign exchange resources should be strengthened by reproducing and exporting oil and gas, supplying the value of sales to the accounts of the Central Bank – which stopped 6 years ago -, and the necessity of supplying sovereign and other foreign exchange resources from various sources to the Central Bank to support the balance of The bank of foreign currencies, which will contribute to supporting the Yemeni riyal’s position in the market and creating a state of stability to stop the currency drain.
The activity of exchange houses must be regulated and the supervision of their activities strengthened according to the law, says Dr. Hatem Basarda, Head of the Business Economics Department at the Faculty of Economics and Political Science at the University of Aden, and to limit illegal currency speculation, and to stop printing any new currencies for the riyal without an official cover, and to secure import By providing a permanent balance in the central bank.
Dr. Muhammad Banaja calls for encouraging the central departments of commercial and Islamic banks located in Sana’a to transfer the center of their banking operations to the temporary capital of Aden, using the methods of enticement and providing legal incentives to them, and to request the provision of temptations to them through direct and indirect monetary policy tools.
Economic researcher Saleh al-Jafri believes that the salaries of officials, officers and members of the armed forces, and the various military and security formations that are disbursed in foreign currency should be supplied to the Central Bank, and then the Central Bank disburses them to those at home in Yemeni riyals at an agreed exchange rate.