Further depreciation for Yemeni Riyal [Archives:2006/985/Local News]

September 28 2006

SANA'A, Sept. 27 ) The Yemeni Riyal value is expected to drop to YR 207 against the US Dollar in 2007, according to a report released by British Economic Information Unit.

The report expected a decrease in the actual economic development rates, arriving at a percentage lower than that targeted by the World Bank reaching 7 percent, a rate considered important for achieving sustainable development in Yemen.

It further indicated that inflation is increasing due to lifting the support of oil derivatives last July and levying income tax, causing the inflation rate to jump to 18.4 percent compared to 12.6 percent in 2005.

Next year will witness a decrease in the inflation rate to arrive at 11.3 percent. This decrease will result from the price-reform and expenditures-shrinking policies adopted by government following to the presidential elections; however, it will not lead to a decrease in food and consumer commodities prices.

Additionally, the report expected the Central Bank of Yemen to continue the policy to make a gradual and annual decrease of Yemeni currency value. Though this measure will reduce inflation, it will not permit a quick and actual decrease in the nominative value of the currency.

The report also indicated that the an increase in oil exports returns this year reaching to USD 6.6 billion against USD 6.2 billion in 2005. However, the report expected a decrease in oil returns dropping to USD 5.9 billion in 2007 due to international oil prices slump.

It went on to say that the poor management of the central government and public opposition hindered the Yemeni efforts exerted for achieving economic liberalization.

It also hinted at the World Bank's announcement for decreasing the financial support provided to Yemen by 34 percent over the next three years, unless Yemen achieves advancement in economic reforms and combating corruption, thus the bank's support to Yemen will shrink to USD 280 million.

Reaching an agreement with the International Monetary Fund will enable Yemen get USD 300 million, added the report. It also expected the monetary fund will sign an agreement relating to renewing its program in Yemen, according to the political support provided by their member countries.

The report also expected Yemen authorities to face pressures, aiming at getting the country to overcome the difficulties ensuing from the exhausting of oil reserves.