Liquidity and Increase of Yemen’s Exports [Archives:2000/28/Business & Economy]

July 10 2000

By: Mahyoob Al-Kamaly
Increasing Yemen’s exports to expand the base of the national financial resources is one of the main concerns of local producers. There are more imported goods than local products. When this is added to the reduced liquidity in the Yemeni Central Bank and the Commercial Banks, it affects the ability of these banks to give credit to producers to help them improve their exports.
Recently, the YCB announced an increase in its reserves. This should lead to a serious consideration for improving national exports and decreasing the volume of expenditure on imports.
However, one can not guarantee that the increase in prices of the crude oil which has led to the increase of the YCB reserves will keep on the same track in the coming months or the next year. If prices fall, the bank will spend all its reserves on imports. This will affect the local products. The government and the YCB may say that the policy of the open market creates a competitive atmosphere for the producers and importers; but we have to take into account the fact that the volume of our exports other than oil is very small, and that it does not exceed 5% of the total exports. This imbalance between imports and exports always encourages imports and smuggled products.
Increasing the quantity and quality of our exports is the best means to get rid of the state of stagnancy in our national products and to help the country gain hard currency, enabling banks to get back their ability to advance loans.
In this regard producers as well as importers should take into consideration the volume of exports and imports. The YCB should follow a viable policy to extend a helping hand to producers and encourage them to increase their exports.
Since the beginning of the economic reform program, the YCB has tried to overcome the situation of lack of liquidity by selling treasury bonds. However, it has been unable to put an end to the deterioration of our currency due to lack of motivation of commercial banks and businessmen to increase the volume of exports. Oil exports have been the main source for supporting the general budget and its absence has been the main reason for deficit in it.
Economists agree that depending on one source for increasing liquidity makes it difficult for the policy of economic reforms to succeed because this source is likely to be drained.
Developing resources, increasing industrial as well as agricultural production and maintaining high standards so as to compete with similar foreign products will help ensure a regular increase in incomes.
Yemen’s Economy has been fluctuating over the past five years due to the fluctuating prices of oil. Consequently, bank loans to producers decrease resulting in some investors being badly affected and some factories having been shut down.
To save our market from the overflow of imports which are supported by the YCB, the bank should outline measures to increase national exports in order to ensure stable financial development, not affected by the fluctuation of the price of oil in the world market.