Central bank split hinders government efforts to save the Riyal

Central bank split hinders government efforts to save the Riyal

The three-and-a-half-year war in Yemen has split the central bank between the government operating from the interim capital of Aden (the southern part of the country) and the Houthi rebel group that controls the capital, Sanaa, threatening the failure of local currency rescue efforts, which continue the rapidly growing decay of Dollar.

The Yemeni Riyal is witnessing a sharp and rapid decline in its value against the dollar, and local currency prices have fallen sharply against foreign currencies since the end of last August, and the price of the dollar has reached more than 630 Yemeni riyals since the middle of this month, compared to about 513 riyals in the mid-month Preceded by, the US dollar was early in 2015, equal to 215 riyals.

In order to curb the dollar and save the riyal, the legitimate  government announced a package of economic measures to save the local currency, including raising the salaries of civil sector employees by 30% starting September, raising the interest rate on certificates of deposit to 27%, and profit on the agency deposits to 23%, The interest rate for government bonds was raised to 17%.

The central bank of Aden announced earlier in September that the financing of imports of essential goods would be resumed with the benefit of a Saudi deposit, and that funds would be provided to banks for the purpose of providing less than 200,000 dollars for the import of essential goods.

The Ministry of Planning, in a report released at the end of July, stressed that the split of the central bank disrupted commercial banks with the instructions of inconsistent and non-functional monetary authorities, resulting in the impossibility of using appropriate monetary policy instruments to mitigate the exchange rate crisis such as interest rate and reserve ratio Legal.

Professor of Banking sciences at the National Institute of Administrative Sciences (INPI) Tariq Abdul Rashid stressed that solving the problem would not be through unifying the work of the central bank but in subjecting the Bank of Sanaa to act under the monetary policy of the central bank.

Abdul Rashid told al-Masdar online that "This will guide the unification of the management of monetary policy. In particular, the central bank of Sana'a is not doing a positive job in monetary policy because it no longer controls the right tools for active participation, foremost of which are the foreign exchange reserve and the currency printing or the tools to influence the amount of money displayed in any direction. "

Abdul Rashid said that it was only hoped that the Bank of Sana'a would act positively (not to impair the performance of the central bank's monetary policy).

He pointed out that if the bank of Sanaa does not do such a thing as required at this moment, this will give the central bank of Aden an opportunity for the outside parties to avoid their responsibilities towards the internal public debt.


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