Central Bank of Yemen sells $38 million to balance supply and demand of hard currency

The Central Bank of Yemen (CBY) sold $38 million to currency exchangers last Tuesday to meet market demands for hard currency for the first time in 2009, pointing to the stability of the currency market during the last period, according to an official report issued by the CBY.

The source disclosed that the bank would continue to support other banks to absorb the surplus of Rial and that it would also continue to monitor the exchange market and take the necessary procedures to realize stability.

The CBY said that stability was achieved last period due to encouraging economic policies which have been related to deposit certificates and treasury bills, as well as encouraging interest deposits of rial against the dollar. This policy led to a decrease of dollar deposits and an increase of rial deposits, therefore, the inflation rate decreased by 3 percent.

The CBY will continue its tasks of monitoring the market and taking the necessary actions to maintain market stability.

This policy applied by the CBY is criticized by economists who say that this economic policy is faulty because it does not allow for the expansion of the productive capacity of the Yemeni economy. An increase in exports would increase the sources of foreign currencies entering Yemen.

On the other hand, another economist's comment said that the demand for dollars is more than the supply due to Yemen being a consumer country. A consumer country means that Yemen gets all of its needs from abroad, so it needs further hard currency to import its needs. 

The CBY sold $1.077 billion during 2007 to protect the value of the Yemeni riyal, while in 2006 it sold $1.122 billion to the market.

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