Still an ongoing concern, but… Rial plummet slows in 2002 [Archives:2002/51/Business & Economy]

December 16 2002

By Yemen Times Staff
Yemeni currency exchange rates have fluctuated during 2002, and the Yemeni rial has seen a loss of three points of its value against foreign currencies, registering 174 rials against the US dollar in January and 177 rials at the end of last November.
Although some banking sources consider the Yemeni rial loss small when measured against its big losses previously in the past three years, the purchasing power of the rial has retreated noticeably due to decline of individual incomes.
Sources have attributed the non-stability of the Yemeni currency to a fierceness of brokering on liquidity in the market and the banks manipulation in prices and their lack of commitment to a pricing unified with rates issued by the Yemeni Central Bank.
The sources see that availability of foreign currency reserves at the Central Bank has helped to some extent in relative stability of the rial after some financial sources had expected a collapse in its price at the end of this year to reach 200 rials against an American dollar.
According to Central Bank statements, the volume of reserves in value of foreign assets the bank possesses amounted to around $4.72 billion to the end of last September, which is the highest rate the bank achieves.
This monetary reserve has given the bank the power to overcome market speculations that has reduced by 25% the difference in decline of the rial price as it was expected at the beginning of the year.
Bankers, however, consider that lagging by the sides of the government monetary sector and the private sector, in the establishment of a stock exchange market, will keep the rial weak. This threat is thought to be the reason behind the chaos prevalent in the present banking market, which in turn negatively affects the rial’s power.
However, despite that the foreign assets of the Yemeni banking apparatus have risen till the end of last September to YR 766.5 billion, the committee assigned with the establishment of a stock exchange market is still preparing studies needed for guaranteeing the establishment of a successful market.
A recent report on human development mentions that the economic and financial reforms the government has been implementing since 1995 have harmed people of limited income, and has not helped improve their purchasing power, whereas unemployment among has risen by 35%.
It is to be pointed out that the value of the Yemeni rial was 50 rials against the dollar at the beginning of carrying out the economic reforms and increased to 177 rials against the dollar after floating the currency price in the market.