Posted in:
Business & Economy
Written By: Faisal Darem
Article Date: Apr 12, 2008 - 8:18:36 AM
Money changers such as this have been struggling to cope with the demand for dollars.
The Central Bank of Yemen (CBY) sold $107 million to currency exchangers last Sunday to meet market demands for hard currency for the fourth time in 2008, according to an official report issued by CBY.
The CBY have sold $452 million during January until now to cover market’s need of hard currency. The report pointed that the exchange market during 2007 was stable and the value of the riyal decreased against dollar just by less than of one percent.
The CBY said that stability was achieved last week due to encouraging economic policies which have being taking in particular related to deposit certificates and treasury bills as well as encouraging interest deposit of riyal against dollar. This policy let to a decrease of dollar deposits and an increase of riyal deposits.
CBY will continue its tasks of monitoring the market and taking the necessary actions to maintain market stability, particularly given the fact that reserves of foreign currencies now exceed $7 billion, according to the official report.
“The demand for dollars is more than the supply due to Yemen being a consumer country. I mean that this country gets all of its needs from abroad. So, it needs further hard currency to import its needs” said Taha al-Fosiel, economist at Sana’a University.
Selling dollars to the market is a successful way to protect the value of the riyal against hard currencies. This monetary policy has been confirmed as a useful policy by all of the international financial institutions, according to al-Fosiel.
The bank should maintain the stability of exchange rates as one of its responsibilities according to the law stating that the bank must protect the value of the national currency, said Professor Mohammed al-Afandi, Chairman of Yemeni Strategic Studies. He said that the economic policy applied by the bank 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.
The bank provides the market with foreign currencies to improve the position of Yemeni exports abroad, making Yemeni exports cheaper and more attractive to foreign importers. An increase in the volume of imports leads to an increase in the demand for foreign currency and to a decrease in the volume of domestic production, Afandi said.
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.
