Financial & Monetary Reform in Yemen, Positive Indicators [Archives:2001/36/Business & Economy]
Overall financing of the general budget surplus of Yemen has during the first half of this year realized a relative success by saving YR 60.4 billion, i.e. by 8.4% of the gross domestic product GDP against a surplus of YR 79 billion of the last year, which did not entail the need to issue new treasury bonds by the Central Bank of Yemen (CBY).
A report issued by the CBY for the first half of the year 2001 stated that the CBY issued deposit certificates to absorb surplus liquidity in the market aimed at curbing inflation. Its total amount for the first half of 2001 reached to around YR 18.6 billion and is expected to rise to YR 40 billion at the end of the current year.
The report further added that the issuance of the deposit certificates enabled reduction in growth of local liquidity rate from 6.4 percent in the first half of 2000 to around 2.8 percent in this year. It is ascribed to the measures taken by the CBY to submit part of its foreign assets to local market for feeding it with foreign currencies.
The report stated that the net of foreign assets at the Central Bank of Yemen registered a surplus of USD 374 million at the first half of the current year against a surplus of USD 693 million at the same period of the last year.
Furthermore, the report stated that the surplus in the trade balance drew back to USD 245 million during the period from January up to last March against USD 403.2 at the end of March in the previous year.
The report attributes this fallback to two contributory factors: the first was due to the decrease in value of exports from USD 972 billion at the first quarter of 2000 to USD 816.8 at the end of this year; the second factor is due to the decrease of the current net of transactions at the two compared periods and at the rate of 9.1 percent. Against that, the deficit in the servicing balance dropped by 18.5%, mainly appeared in improvement in the level of trade and governmental services.
The measures taken by the Central Bank of Yemen for decreasing the interest prices led to growth of credits offered to the privet sector from 4.9% at the first half of the previous year to 10.2 % at the same period of the current year.
The current account available at the CBY registered a surplus of USD 357.9 at the end of the first quarter of 2001 against USD 536 million at the same period of the previous year. However, the capital account registered a deficit of USD 367.9 million in this year against USD 343.2 million at the first quarter of the previous year.
Meanwhile the overall budget of commercial banks, regarding their assets, rose to YR 315.6 billion at the end of June 2000 to YR 337.2 billion at the end of the last June.
The CBY’s report stated that the net of foreign assets of the commercial banks rose from YR 94 billion at the end of June 2000 to YR 110.4 billion at the end of the last June.
Furthermore, the facilities offered to the trade sector rose from 30% to at the end of the last December to 32.4 % at the end of June 2001. Regarding the industrial and the construction sectors the facilities offered respectively rose from 12.6 % to 14.5 % and from 3.5 % 4.3 % during the same period.
The CBY-led financial reform policy with the technical help by the world Bank led drop in rate of loans in foreign currencies to the overall credit facilities from 41.9 % at the end of the last December to 39.4 at the end of June 2001. Similarly, the deposits accounts at commercial commercial banks at the first quarter of the current year increased from YR 272.5 million to YR 249.7 billion within the same period of last year.
The Central Bank of Yemen expects a decrease in the debts service due to the Paris Club countries during the current year and the next year from USD 125 million to 96 USD million.
High financial resources resulting from increasing oil prices have led to the increase in the net of foreign assets of the central bank in the period from January to May of this e current year by USD 158.8 million, a total amounting to USD 303.9 million.
It is worth mentioning that Yemen is implementing a financial and economic reform program since 1995 which is supported by the World Bank (WB) and the International Monetary Fund (IMF). The program aims at reforming structural-related failures, reducing budget deficit and floating the price of the Yemeni Riyal, now ranging between 168 to 170 riyal against the dollar.