Saudi Arabia deposits $1bn into Yemen's Central Bank

Bid to inject foreign currency into market after crude exports hampered by Houthi port attacks

The Central Bank of Yemen in Aden. Reuters
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Saudi Arabia has deposited $1 billion into Yemen's Central Bank in an effort to support an “economic reform programme”, Saudi state media announced on Tuesday.

“The programme aims to develop a clear road map and a vision that takes care of the Yemeni people first and addresses their needs, in addition to strengthening efforts to build reserves at the Central Bank of Yemen to enable it to enhance economic stability,” Saudi Press Agency reported.

The Head of Yemen's Presidential Leadership Council, Rashad Al Alimi, and Central Bank Governor Ahmad Ghaleb welcomed the move.

“The deposit will constitute a strong momentum to the Yemeni economy, national currency stability [and] mitigate the humanitarian crisis that was created by the terrorist Houthi militias backed by the Iranian regime,” Mr Alimi said.

Deputy governor for banking supervision at the bank Mansour Rageh told The National last week that Saudi Arabia had asked for reforms within the Central Bank ahead of the deposit. In November, the Arab Monetary Fund signed a $1 billion agreement to support Yemen's economic reform programme.

“These reforms are related to issues of governance, transparency and enhancing banking supervision,” he said.

Mr Rageh said the PLC has also been pressuring the Central Bank to print more money in order to finance the government.

“They printed maybe five times when they were not supposed to print. Now we have a huge liquidity in the market,” he said, referring to the bank's previous management.

However, there are certain expenditures that cannot be avoided, Mr Rageh said, like payment of salaries.

“The Central Bank is in a difficult situation. If you stop printing money and financing the government the salaries will stop and maybe electricity will also — the basic services — will be affected.”

Yemen's liberated areas, mainly in the south, have been suffering from a shortage in foreign currency — the main source of which comes through the export of crude oil through Hadramawt and Shabwah ports which have been under threat due to Houthi attacks.

Active fighting has largely stopped among the warring sides, despite the breakdown of a UN-brokered truce in October.

The country is in a state of no-war, no-peace stalemate. Saudi Arabia leads a coalition to fight against the Houthis, since the group's takeover of the capital Sanaa in 2014.

Saudi Arabia and the Houthis have been in talks, The National has also learnt.

Last month, the Aden-based government raised the US dollar exchange rate used to calculate customs duties on non-essential goods by 50 per cent amid dollar shortages, sending prices to all-time highs.

On Tuesday, the rial was trading at 1,225 to the US dollar on the black market in Aden, traders told Reuters.

Yemen has two rival central banks. The government has resorted to money-printing to finance the deficit, but in Houthi-held areas, where new notes are banned, the rate is around 600 rials to the dollar.

With additional reporting from Reuters

Updated: February 22, 2023, 8:37 AM